With the entry of private and public sector energy majors in light emitting diode (LED) manufacturing, the industry is positive that manufacturing in the LED sector in India will speed up in the next two years. ONGC and NTPC have recently announced their entry into the LED space and promised to rapidly scale up production and bring in such technology that will help breach the price barrier. Among the private entrants who have already commenced manufacturing is Sujana Energy Ltd, a subsidiary of the Hyderabad based Sujana Group, which is partnering with Japanese firm Nichia Corporation for LED lighting and display. De Core Nanosemiconductors Ltd is also investing Rs 9000 million in a plant in Gujarat to manufacture LED chips.
By Srabani Sen
Thursday, December 16, 2013: It is widely perceived that LED lighting is a lucrative business in India. However, with the entrance of large players, market consolidation is bound to happen. Government bodies like the Bureau of Energy Efficiency (BEE) and the Bureau of Indian Standards (BIS) are actively working towards standardisation in LED lighting products, which would, in turn, help market consolidation by filtering out non-standard products that are currently present in the market. This has also given rise to an LED ecosystem with allied industries benefiting from increasing adoption of LED technology.
Is industry ready to start manufacturing?
The industry is of the unanimous opinion that the entry of large players offers the potential to scale up production of LEDs in India. Players are of the opinion that the industry is ready to start manufacturing in a big way. Says R Chellappan, CMD, Numeric Power Systems Ltd, “Manufacturing will definitely start off faster in India.”
“We have already started seeing a move towards local production of LED based lighting products in India. As the industry grows and LED lighting makes wider inroads into the general lighting segment, we will definitely see a move towards production of raw materials also in India itself. LED lighting products are already being manufactured in India and soon we can be in a position to even give tough competition to China, in terms of price and quality,” says Praveen Kumar Sood, chairman, Regnant Energy Solutions.
MV Ramana Rao, president, LED products Manufacturers’ Association (LEDMA) and CMD, MIC Electronics Ltd, opines, “With respect to LED lighting products, there will be a definite spurt in manufacturing activity over the coming years. However, it is difficult to envisage a big take off for LED chip manufacturing in the next few years. Pricing, issues related to IP, and cross licensing will have a bearing on the pace of setting up LED manufacturing facilities in the country. In the long run, certainly capacity will be created within the country for LED chip packaging and LED chip manufacturing as well.”
Hari Kiran Chereddi, managing director, Sujana Energy Ltd, feels that with the latest government initiatives to use LED lighting in major cities and facilities, the market has been given a major boost and LED manufacturing will pick up fast. Sujana, through its partnership with Nichia and Cree, plans to jointly explore opportunities in the field of LED lighting and display. “With the large potential in the LED market, it is imperative that both Indian and international companies come up with their facilities. The focus of large organisations should be to increase the affordability of LED luminaries through scale and later get into LED chip manufacturing,” says Hari Chereddi.
As far as manufacture of LED chips is concerned, industry players are of the opinion that it will still take some time to take off. LED chip manufacturing is quite a technology intensive venture and the best quality LEDs in the world are still manufactured in countries like USA, Japan, Taiwan and Korea. LED chip manufacturing needs huge investments, and more importantly, skilled technical manpower from an array of different fields like optics, lighting, chemistry, thermal management, etc, in which India currently faces an acute shortage.
Although De Core is manufacturing LED chips as well as modules/light engines and products, G Gururaja, director, operations, Avni Energy Solutions Pvt Ltd, feels that in India, volumes are still not high enough for LED chip manufacturing to start off. “But about 10 Indian companies are doing good business in LED lighting,” he says.
Says Gulshan Aghi, executive president and CEO (LBG), Surya Roshni Ltd, “Manufacturing LED chips calls for specialised technological knowhow, which may not be easily available, apart from the fact that currently there is limited market demand. Thus, it may not happen immediately.”
Gopal Shukla, regional manager, north India, Seoul Semiconductor Co Ltd, says, “Most of the players are currently in the initial stage of testing, development and evaluation. The volume for LED lighting products has to pick up first, only then will chip manufacturing be viable. But LED products of good quality and reliability can definitely be manufactured in India.”
Can industry start manufacturing without govt support?
Here, opinion within the industry is divided. While a small section believes that industry can definitely start manufacturing LED lighting products without any government support, the majority are of the opinion that without government support, LED industry cannot move ahead and grow at the required pace. Carol Chiu, global marketing head, GlacialLight, feels that the industry can start manufacturing LED products without government support, but it will grow at a much slower pace.
BEE and BIS are taking steps to formulate policies and standards for LED products, which should soon be in place. “The government is already encouraging LED manufacturing—BEE is taking active part in promoting the sector while BIS is preparing specifications/standards for it. It is quite likely that these initiatives will give an impetus to manufacturing to a greater extent,” says Gulshan Aghi.
Hari Chereddi begs to differ, saying, “Although there have been a lot of discussions, there are currently no government sops for LED light manufacturing. Impetus like removing sales tax and introducing VAT for LED lighting products would be a positive step in this direction, similar to incentives that the solar industry enjoys. Also, there is a need to encourage the use of LED and solar technology together, which has tremendous energy saving potential, and can make a sustainable impact on society. LED luminaries can be powered by solar energy through PV panels to provide clean light. LED along with solar power can be used in those areas that are not connected to the electricity grid, thus bringing light to off-grid regions as well as saving energy. The social, economical and environmental benefits of such technology would be very attractive.”
Says Deepak Loomba, managing director and CEO, De Core Nanosemiconductors Ltd, “We manufacture LED products without any government support. If the technology and products are state-of-the-art and globally competitive, nothing much is needed from the government. The only area in which the government can be of assistance is to encourage public demand through policies and guidelines based on the energy efficiency aspects of LED products.”
Gururaja, too, feels that government policies are required to increase awareness among the people. The government should aggressively advertise the fact that using LEDs can save 50-90 per cent of power and thereby reduce a consumer’s carbon footprint. The government can even make it mandatory to use LEDs in certain places like commercial centres, parking lots, shopping malls, and for billboards, streetlights, ATMs, etc.
While Chellappan says that the industry needs a lot of support from the government regarding licensing, policy changes, collaboration and technical tie-ups, Praveen Sood feels that financial concessions or tax benefits for the LED lighting supply chain will certainly lead to much faster growth in the sector.
In a nutshell, as the LED industry is currently working towards reducing initial capital costs, it needs special incentives from the government to encourage companies to invest in this sector. A great example here is the solar industry, in which the government has taken the initiative to drive India to the pinnacle of solar power generation.
The ambitious ones
No doubt, government support will accelerate the pace of manufacturing, but some LED players have already started manufacturing. MIC Electronics Ltd took on the development and manufacture of LED lighting products four years back as a pioneering effort, much before general awareness regarding LED lighting took root in the country. De Core has just created the biggest packaging capability in Noida. The fab (chip production) will go operational in Q1 2011. “We have very good capacities (the highest in this region) already created and will be expanding in packaging no earlier than 2012,” informs Deepak Loomba.
Sujana also ships out a wide range of cutting edge indoor and outdoor LED lighting products, which not only have superior designs but also have the backing of majors like Nichia, Cree and Texas Instruments. “Our prime focus is to maximise the energy saving potential of our existing products and continue to expand on the same lines,” explains Hari Chereddi.
Surya Roshni is also in the business of LED lighting systems and extends its product range every three months. Avni has also manufactured general lighting products for the last one and a half years. Gururaja says, “We are continuously expanding our business and expecting to cross a turnover of Rs 800-1000 million next year.” GlacialLight, too, manufactures a number of exquisite LED lighting products with plans to manufacture even more, soon.
Regnant and Numeric are planning to start manufacturing soon. “We plan to manufacture more on the application side and products for end users,” informs Chellappan.
“We are definitely looking at manufacturing LED based lighting products in the near future. We have already made heavy investments in technical equipment for product testing and are coming up with a dedicated lighting R&D facility in New Delhi by 2011 end. We have a deep understanding of the power electronics used for driving LED based lighting solutions, which is the prime cause for concern when it comes to the longevity of any LED based lighting solution. We have plans to manufacture LED based architectural lighting fixtures,” adds Praveen Sood.
How will the industry benefit?
If manufacturing starts off in India, the industry in particular and nation as a whole will, no doubt, benefit immensely—dependence on imports will lessen, costs will come down, standards will go up, and most importantly, with awareness and more usage, power consumption will reduce drastically. Lighting in India consumes 18-21 per cent of the total power generated. If India adopts LED lighting rapidly, we can save about 70 per cent of power, which is around 10-12 per cent of the peak demand load (India’s peak demand load shortage is 12 per cent). This means that even without any additional power generated, there will be no power shortage.
“With more manufacturing in India, we will definitely see cost reductions in the industry as raw materials will be available more abundantly and the costs of logistics and procurement will come down. An increase in healthy competition between multiple players will definitely lead to an overall improvement in the quality of the products available,” explains Praveen Sood.
Adds Gulshan Aghi, “Costs will definitely come down provided demand increases. Mere manufacturing cannot reduce cost significantly. The need of the hour is to educate prospective users about the benefits of LED products. Professional bodies like ISLE and ELCOMA are working ceaselessly along with BEE to spread awareness about LED products.”
Gururaja also believes that once volumes increase, costs will further come down. “It is purely a volume game,” he says. According to Gopal Shukla, once manufacturing starts off, direct and indirect employment will increase as lot of skilled manpower will be required. “Also, our dependence on Chinese products will get drastically reduced. Maintaining the quality and standards of products will also be possible since it will be controlled from within the country,” he adds.
Chellappan sees benefits on a larger scale. “Conversion of conventional lighting solutions to LED lighting is a must for India. It will lead to greater energy saving and improved power quality. Even though it might be a little costly initially, it will benefit the nation and the globe, as a whole,” he says.
Unlike in several other technology domains, India need not lag behind the advanced countries in the field of LED lighting. If genuine development and manufacturing takes place in the country, costs can certainly be brought down. “However, if companies resort to mere assembly of kits and sale of sub-standard and spurious imported products, the pace of adoption of LED lighting in the country will be adversely affected and slow down,” opines Ramana Rao.
Introduction of standards and regulations in the domain of LED lighting is an imminent need to ensure availability of high quality LED lighting products in all domains—domestic, industrial, commercial, architectural, decorative and various other user specific application areas, both in rural and urban environments. Industry and government agencies like BEE and BIS need to work together to evolve national standards that match international norms in respect to performance and reliability. Accredited laboratories need to be specifically designated to test these products for certification purposes. Government also needs to prevent the proliferation of spurious, substandard and unbranded products in the interest of the user communities. Hence, genuine manufacturing in the country, coupled with appropriate screening and certification will certainly provide price and quality safeguards to Indian consumers.
“Development capabilities within the country will equip the nation with the ability to customise in order to realise country specific and environment specific products, which can compete in terms of price and performance with high quality imported products brought in by MNCs operating in the country,” adds Ramana Rao.
How the channel partners will benefit
With manufacturing kicking off in full swing, channel partners will also benefit to a great degree. The advent of local manufacturers will surely help reduce the cost of available products, create choices and increase applicability to local conditions while providing for better sales/post sales service.
Increasingly, channel partners are looking for manufacturers with a presence in the industry in terms of local partnerships, of sound financial strength and a commitment to being green. Says Chellappan, “Channel partners have more of an access to the market than the manufacturers or suppliers. Hence, they will always benefit the most with such products which are going to be in high demand.”
“Input costs to channel partners will come down if the genuine development and manufacture of high quality LED lighting products takes place in the country,” adds Ramana Rao.
Praveen Sood also feels that the availability of a basket of products from the ready stocks of manufacturers will definitely mean more business for channel partners. “Additionally, since selling of LED based products requires techno-commercial skills, it will definitely mean an increase in their knowledge base,” he adds.
Hindrances to manufacturing
As a manufacturing destination, India has been facing quite a few challenges including a shortage of skilled manpower, lack of manufacturing clusters and the need to create knowledge hubs for the retraining of manpower. These challenges are also being faced by the LED manufacturers. “With the increase in local demand and competition from other growing economies, training and development of manpower is essential. We are actively networking with local governments to work with colleges/universities to bridge the gap between industry and academia,” informs Hari Chereddi. Praveen Sood agrees, saying, “The biggest obstacle to starting manufacturing in India right now is definitely the dearth of skilled manpower.”
While Deepak Loomba feels that the complete absence of the semiconductor ecosystem is the main hindrance, Chellappan says procuring raw materials is the major obstacle. Adds Gopal Shukla, “Lack of proper standards is also creating problems.”
“Reliability, cost and lack of testing are some of the hindrances that LED manufacturers are facing. We are setting up a very advanced lighting laboratory and investing more than Rs 120 million to provide a full fledged facility for LED testing and R&D work including photometric evaluation. This will accelerate LED development not only in Surya but in the industry as well,” adds Gulshan Aghi.
Says Gururaja, “Huge investments on fixtures, high quality EMS with affordable costs, and the availability of trained manpower are some of the problems that we face. Apart from this, lack of knowledge among customers regarding the technology is a major challenge. For example, customers should be aware that each LED manufacturer recommends different wattages for the replacement of existing lamps, which leads to non-standard products. Demands from the customers for 5-10 years of warranty, which is not available in conventional lighting, will not be beneficial because if we provide more years of warranty, we will load that cost onto the price of the product.”
Points out Carol Chiu, “Although we rely on the import of LED chips to design and manufacture LED lighting products, these imported LED chips are more expensive than the energy saving bulbs, making LED lighting products costlier.”
Industry’s expectations from govt
The industry has some genuine expectations from the government, which, with timely action, can speed up manufacturing of LED products in India, and will also see volumes going up. “Like all new technologies, LED lighting technology also needs active government support in terms of tax incentives, R&D support and most importantly, standards and regulations,” says Hari Chereddi. Agreeing to this, Gopal Shukla adds, “The government should come up with proper standards for LED lighting and have sufficient projects and programmes to sustain the growth and increase demand substantially.” Deepak Loomba says, “The government should structure public demand and create public funding capabilities.”
“A preferential taxation structure for LED lighting products at the local level and reducing import duties on essential raw materials not easily available in India, will definitely be helpful for manufacturing,” says Praveen Sood.
The industry, therefore, expects that the government should introduce policies and take action to assist it in setting up more domestic LED manufacturing and packaging plants to provide more high performance and low priced LED chips like the governments in USA, Japan, Korea and China, which have established their own national plans to facilitate rapid development of the LED industry. The government should also vigorously promote LED products by arranging workshops, advertisements, making the use of LEDs compulsory, etc.
“We expect the government to accelerate the pace of LED manufacturing in the country by giving tax benefits to the manufacturers; tax rebates to end users to encourage the use of energy efficient devices like solar subsidies; ensure customs duty/CVD exemptions for raw materials and capital equipment; offer protection from dumping substandard products; and initiate awareness drives about the advantages of using LED products,” Ramana Rao signs off.
Current manufacturing scenario in LED industry
Market demand for LED lighting products is growing exponentially with each passing day, and the global trend towards green lighting will certainly make LED lighting products mainstream in the next few years.
Several manufacturers are already in the fray in the LED lighting domain. They include MNCs, Indian lighting majors, new entrants, kit assemblers and traders. “In the years to come, there will certainly be a shake out and only a few major players may remain in the field—barring the unorganised sector—capturing 80-90 per cent of the market,” says MV Ramana Rao, president, LEDMA.
Praveen Kumar Sood, chairman, Regnant Energy Solutions, adds, “The present manufacturing scenario is still very import dependent. I’m sure, we can expect a much greater level of localisation in the coming years.”
R Chellappan, CMD, Numeric Power Systems Ltd, believes the present scenario is not yet an organised one since the LED lighting sector is yet to prove itself. “In the near future, the LED market will surely mature to give customers better products at a lower price,” he adds.
Gopal Shukla, regional manager, north India, Seoul Semiconductor Co Ltd, also feels the same. “The market will be very big in the next two years because of various reasons like price cuts, more knowledge about the benefits of LED, better government policies and proper standards,” he says. “Presently, what happens is ‘push marketing’, which means that manufacturers are educating the end customers about the technology. After two years, it will be pull marketing, wherein customers will demand what they want,” explains G Gururaja, director, operations, Avni Energy Solutions Pvt Ltd.
According to Hari Kiran Chereddi, MD, Sujana Energy Ltd, the current scenario has many contract manufacturers from China, Taiwan, etc, but innovation is missing in this sector. “Customer education will play a major role in ensuring a paradigm shift in this direction. Customers are looking for a wider choice, aesthetic designs, affordable costs and more applicability to their day-to-day life. I strongly feel that this technology will not only become much more affordable but will see a wide array of applications in growing as well as developed economies. With the current market trend, we are confident that the adoption curve for LED lighting will be much higher than that of CFLs,” he adds.
Industries that would benefit if LED manufacturing takes off in India
Besides a boom in business leading to massive benefits to LED players, all users of lighting, especially industries that use grid based lighting on a 24X7 basis, will benefit a lot if LED manufacturing takes off in India in a large scale. This is because the electricity consumption will come down by about 60 per cent. It will also substantially reduce the demand and supply gap for electricity.
Electrical utility suppliers will also benefit because energy saved from lighting can be diverted and deployed elsewhere, which can be more remunerative. Increase in energy efficiency will be seen across the board, which will help myriad sectors/industries to cut down on their costs.
Government of India and other agencies that generate power will benefit because energy saved will be more than energy produced. Municipalities and other local bodies will also benefit if LED streetlighting can replace conventional streetlighting through boot models.
People living in rural and mountainous regions, who do not have access to grid power, and are not likely to in the foreseeable future, will benefit a great deal because LED lights and solar power are an ideal combination.
India will benefit immensely from such specialised manufacturing activities, which will not only give rise to skilled manpower, but will drive down costs, improve acceptance and pave the way for better quality products.
Electronics Bazaar, South Asia’s No.1 Electronics B2B magazine