China Pushes for Even Greater Share of World CFL Market

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Next month marks the expiration date for the European Union’s stringent anti-dumping duty on Chinese compact fluorescent lamps (CFLs), imposed in July 2001. As long as European lighting-industry leaders do not push the EU to extend the 66-percent tariff during an upcoming review, this would be an opportune time for China’s CFL industry to further strengthen its position in the world market, according to China Energy Daily.

Since 1998, China has become the world’s largest producer and exporter of the energy-saving lamps, changing the structure of a global market that was once monopolized by European and American companies such as Philips, GE, and Siemens-Osram. Chinese manufacturers supplied close to 1 billion CFLs worldwide in 2004, or about 75 percent of the global total, according to Global Source’s report Light Bulbs & Tubes. In the face of intense international competition, the low price of the Chinese-made bulbs has been the leading factor behind this growth.

China’s surging CFL industry has put unprecedented pressure on European manufacturers in recent years. The European Commission imposed the five-year CFL duty in 2001 after the European Lighting Companies Federation, a trade group for European producers, claimed that China was flooding the market with cheap bulbs. The anti-dumping tariff was a huge blow to Chinese CFL manufacturers, who were dependent on exports for a large share of their market. Half the country’s CFL enterprises went bankrupt within the year, reducing the number of domestic producers from 4,000 to 2,000 in 2001, then to some 1,400 in 2002. To stay afloat, Chinese manufacturers shifted their attention to Asia and the Americas, regions that have imported more than 70 percent of China’s energy-saving bulbs in recent years.

Despite the high tariff, however, a substantial number of Chinese CFLs suppliers remain attracted to the European market because of the relatively high price margins compared with Southeast Asia. And as new EU environmental laws, such as the Waste from Electrical and Electronic Equipment (WEEE) directive, require manufacturers to provide high-quality products that meet strict environmental requirements, the added value of the energy-saving lamps could generate margins as high as 20 percent in Europe (compared with only 6–8 percent in other regions). Recognizing the opportunities, Chinese CFL suppliers are seeking active participation in the upcoming tariff review process in the hope of overturning the anti-dumping restrictions.

Chinese CFL manufacturers are also beginning to explore China’s domestic market, as energy savings tops the national agenda. With more than 1,000 producers nationwide, the indigenous industry has already developed top-notch brands including TCP, TCL, and Oupu. Mass participation in the market has ensured the market’s saturation. Meanwhile, the emergence of high-quality national brands promises robust competition.

Experts believe the peak in Chinese CFL consumption will come in the next few years. A key impetus is the government’s energy-saving scheme, outlined in the 11th five-year national economic plan, which will likely drive policies encouraging CFL consumption. The nation’s robust real-estate market is also stimulating demand. The Beijing City Planning committee estimates that city residents will consume 200 million RMB (US$25 million) annually in home illumination over the next few years. Already, more than 50 million CFLs had been consumed nationwide as of late 2005, and rapidly developing rural areas will continue to provide new markets. Moreover, as the energy-saving bulbs become increasingly affordable for the average Chinese consumer, this is expected to reduce the price pressure on CFL suppliers and enhance their position in the overall lighting market.