▲ The appearance of ‘2019 Guangzhou International Lighting Exhibition’ (Photo = Jung-Bae Kim)    © World Lighting News.

 

 

Written by : Jung-Bae Kim. Publisher & Editor. Lighting Critic.

 

"There is nothing eternal in this world." There is a saying that "the only thing that does

not change in this world is the fact that everything changes",

So, are these adages or proverbs applied to the world's lighting industry and lighting

market? In particular, can these principles be applied to China, which has unrivaled

competitiveness and market share in the global lighting industry and lighting market?

Perhaps the answer to this question is what the world's lighting companies are most

curious about right now. This is because the strategies and tactics that each company will use will change greatly depending on how the situation in China unfolds in the new year.

 

First of all, lighting companies around the world asked, "Will the competitiveness of

Chinese lighting companies weaken in the future?" I have a curiosity. The reason for this is the ongoing US-China trade dispute.

 

◆ Can China continue to remain competitive?

Trade disputes with the United States mean that China imposes high tariffs on products

sold to the US market. In this case, Chinese-made lighting fixtures and parts exported to

the US are subject to high tariffs. And high tariffs will lead to higher prices for Chinese-

made products sold in the United States. Naturally, the price competitiveness of Chinese-made products in the US market is low.

 

This situation could be a "good thing" for lighting companies in countries competing for

the Chinese and US markets. However, the reporter thinks that this will not happen as

easily as he thought. There are two reasons.

 

The first is the issue of the exchange rate between the US dollar and the Chinese yuan.

After the trade dispute between the US and China broke out, the value of the Chinese

renminbi has been declining. In fact, the renminbi's exchange rate has fallen by 8% against the dollar in six weeks since the first US-China trade war began in 2018. It fell 10% from 6.2352 yuan per dollar in March. Accordingly, the decline in this period alone reached 4.5%.

 

As a result, the effect of high tariffs imposed by the United States on Chinese-made

products was largely offset by the cut in the exchange rate. This fact can be seen from the fact that even after the start of the US-China trade war, the quantity of Chinese-made

products exported to the US has rather increased.

 

Of course, simply looking at the high tariffs, China seems to be at a disadvantage than the US. However, combining tariffs and exchange rates means that the high tariffs imposed by the United States are not a big threat for China.

 

◆ Falling Prices of Chinese Lighting Products

Second, the price of Chinese-made lighting products exported to the US market is falling. As the United States began to impose high tariffs on Chinese-made products, some of the Chinese lighting companies that export to the United States faced a decline in export

volumes.

This fact was also confirmed through the words of Chinese lighting companies officials

met by reporters during the '2018 Hong Kong International Lighting Exhibition (Autumn

Edition)' held in October 2018.

 

The problem is that Chinese lighting companies, whose exports to the US market have

declined, have begun to cut prices of products to make up for exports. As a result, the

price of Chinese lighting products, which were still lower, has been lowered.

 

There is no difference that something unexpected has happened from the standpoint of

lighting companies in countries other than China.

 

In this way, (1) high tariffs imposed by the United States, (2) lowering the exchange rate of the renminbi against the dollar (combining the three factors of reducing the export price of Chinese lighting products, one comes to a conclusion. That is, the price competitiveness of Chinese lighting companies) Is higher than before the US-China trade war began.

 

◆ A bigger problem is the “escape from China” by US companies

However, this situation can change again. First of all, American companies can choose to

not import products from China at all.

From the point of view that American companies are more friendly to the United States

than China, and their wages are lower than that of China, they can choose any way to

import lighting fixtures and parts from Vietnam, Indonesia, Malaysia and India. will be.

 

If this happens, it is highly likely that China's lighting companies will suffer a double pain

in which exports will be drastically reduced and the quantity produced will be

accumulated in inventory.

 

However, what Chinese lighting companies need to worry more about than this situation

is that American companies that have entered China or have been producing products

with OEMs or ODMs in China are trying to escape from China.

 

The high tariffs imposed by the U.S. government on Chinese-made products apply to the products of U.S. companies that establish factories in the U.S. to produce products and

bring them to the U.S. In addition, “fairly” is imposed on the quantity of orders imported

by US companies as OEMs or ODMs from Chinese companies.

 

Thus, US companies can move their factories outside of China to avoid the high tariffs

imposed when manufacturing products in China. It can also switch between OEM and

ODM vendors.

 

Otherwise, there is a way to close the Chinese factory and return to the United States. It is said that this can be done from the perspective that it is not a big problem for American

companies regardless of which method is chosen.

 

By analyzing the situation from various angles, it is possible to predict that if the trade war between the United States and China prolongs, the status of China as a “world lighting

factory” will inevitably weaken as American companies escape from China.

Instead, predictions that “post China” countries such as Vietnam and India will see

reflexive gains are gaining momentum.

 

◆ In any case, it is difficult for Korean companies to see reflected profits.

In this regard, it should be noted that in any case, Korea, a partner and competitor of

China, will not be of great benefit.

If China continues to maintain its competitiveness, it is difficult for Korea to escape from

the current situation of weak competitiveness with Chinese lighting companies. Conversely, even if China's competitiveness weakens and Vietnam and India take over, there are not

many advantages for Korea.

 

If you give up production in Korea at all and import lighting products from Vietnam or

India and supply them to the domestic market, you can see the merit of “lower price than made in China”. However, the emergence of Vietnam and India also means that countries with higher price competitiveness than China will emerge as competitors.

 

This means that the price competitiveness of Korean lighting companies that are trying to produce products in Korea and compete with countries such as China, Taiwan, Vietnam

and India in overseas markets may weaken further.

 

As such, the short-, medium- and long-term global lighting industry and lighting market

trends, focusing on China, are complex. But one thing is certain.

 

It is the fact that it will never be easy to increase sales and generate profits in the

domestic lighting market as well as the global lighting market, regardless of the country's or any lighting company, without its own competitiveness.

That's why you can say something like this. "The problem is competitiveness!"

 

 

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