By BizLED Bureau
Apr 11, 2017: A recent report, that said that Chinese companies will take away a bulk of the potential Rs 240,000 million worth of LED bulbs orders from the Indian government, has jolted the Indian LED industry.
Chinese LED manufacturers have always been a threat to the Indian LED manufacturers because the Indian LED makers neither have the financial strength nor the manufacturing capability to match the Chinese levels. They also do not have the same scale of government subsidies like their Chinese counterparts.
Massive business potential
In October 2014, the Indian government launched a massive energy saving campaign and ordered to replace 750 million tungsten bulbs, particularly streetlights, with energy-saving LED lights. This initiative boosted the morale of the domestic LED manufacturers, as they were hopeful of getting good business through this campaign.
Industry sources claim that the order size of LED bulbs under this campaign could eventually swell to as many as 2 billion bulbs. At an average of Rs 120 per LED, the business could potentially rise up to about Rs 240,000 million. But it seems that the domestic companies do not have the wherewithal to meet this demand.
Against ‘Make in India’ campaign?
However, it seems that the Indian manufacturers will be disappointed, as they will once again lose out to the Chinese LED companies. Industry analysts say that since LED lighting lasts for several years, the Indian market will be in the hands of the Chinese players for at least two years.
According to a media report, Praveen Khandelwal, the national general secretary of the Confederation of All India Traders (CAIT), said that if the Chinese players bag the orders, it would go against the Prime Minister?s ?Make in India? campaign. Even bigger LED players in the Indian market do not have the required manufacturing capacity, and are importing bulbs straight from China. This disrupts the entire value chain for small players,” he said, adding domestic companies need about six months to scale up production capacities.
Added Ajay Mathur, director general of the Bureau of Energy Efficiency, “We are concerned that the largest value items are not made in India. We are looking at doing the packaging of the light source within the country in the next two years.”
However, the tendering process is open to all players?big or small, Indian or Chinese. Says Abhijit R Vaish, executive director, Insta Power LED Lighting, ?Make in India is the mantra of the new government. Whosoever is willing to establish manufacturing in India or setting up joint venture would gain from this government policy. The domestic manufacturers should not feel threatened by the low price of the Chinese products because the market cannot be captured by bringing down price mercilessly as this is not a long-term strategy nor is in the interest of any organization.?
India is a lucrative market for Chinese players
India has always been a lucrative market for the Chinese LED players. According to Electric Lamp and Component Manufacturers Association of India, the lighting industry in the country stands at Rs 120,000 million, growing at 17-18 per cent year-on-year. Within this, the LED lighting segment is clocking at over 40 per cent growth.
India, just being at the cusp of a transition from CFL to LED lighting, provides a perfect base for Chinese companies to capitalise on the opportunity. One such Chinese company is Opple Lighting. Recently, Opple has set up its ?experience store? in Chennai. The global brand, which has a presence in 50 countries, will tap the LED transformation in India, said S Venkataramani, Chairman, Opple Lighting India, a wholly-owned subsidiary. Opple
believes that India will be a potentially $500 million LED market by 2017 and, hence, the company is poised to harness this opportunity.
Opple will invest Rs 600 million in the next three years to set up 30 such large outlets across the top 30 cities. ?We are targeting a turnover of Rs 4500 million from our operations in India in the next three years,? said S Venkataramani.
The Opple products, according to Venkataramani, would be cheaper by at least 10-15 per cent compared with the market leaders in India. However, the products will come with the promise of international quality, he said.
How India can fight back
According to industry experts, India should have a strong supply chain management system. Sarabjit Singh, general manager, NTL Electronics India Ltd, said at an event that this is the time to start manufacturing in India. However, the industry believes that the government is now very keen to support local manufacturing.
The Indian LED industry has to majorly depend on imports. High cost of manufacturing due to technology and all the expensive raw material is used adding to the manufacturing cost, and with the absence of industry standards the local companies face a very tough time.
On the other hand, the consumers want cheaper products. A customer knows that he has to buy LED but what type of LED lighting is apt for his requirement is not clear to him. A lot of awareness in this direction is required.
Industry analysts believe that it is high time that Indian LED manufacturers should not only scale up production capacity, but also make efforts to build up a value chain and increase local sourcing. LED majors like NTL Electronics is indeed making an effort to source its components in India.
Around 70 per cent of the raw material that goes in lighting is imported, as the component market in India is still at a very niche stage, and the country hardly has any company to support the electronic components market. As a result, everything is being imported from China. The industry believes that there is a huge potential in the electronics components markets and now with the support of the government?s new incentives and policies, this goal can be easily met.
However, a major change that has happened in the last 2-3 years is the shift of global manufacturing hub from China to India. The labour wage rate in China is increasing rapidly, and the manufacturers there, at present, are facing a tough time. The reliability on Indian manufacturers has, therefore, grown. Therefore, the manufacturers in India have better opportunities now to serve the global markets.