LED industry can not rely solely on "planning"

Shenzhen recently repealed the "Notice on Printing and Distributing the Shenzhen LED Industry Development Plan (2009-2015)". The development plan was formulated four years ago. It plans to build Shenzhen into an important R&D and production base for LED industry throughout the country and even the world. By 2015, the industry will have an annual output value of more than 130 billion yuan. Shenzhen is the most concentrated city for LED companies in China. The local government has given up its development plan for the LED industry and has a landmark significance.

Shenzhen has abolished its own development plan which is leading in China and has long been listed as an important emerging industry. There are real reasons for this. One of the main reasons is that 90% of LED products rely on exports, and the domestic market has not been opened up. As a result, there is a serious surplus of production capacity. Shenzhen LED companies have repeatedly collapsed. The second reason is that there were some related plans formulated by provinces and cities before. LED industry was listed as a strategic emerging industry support, and some ministries also issued the “Semiconductor Lighting Energy-saving Industry Plan”, causing investment in the upper reaches of the LED industry to be overheated for some time. The price of LED products dropped rapidly, and the competition among downstream companies was fierce, causing some companies to close down. Therefore, the LED industry may become the second of the photovoltaic industry, becoming another industry that has embraced it and dispersed. Eventually the entire industry is in trouble and investment is wasted.

Apart from the same difficulties that the LED industry and the photovoltaic industry are heavily dependent on external demand, extremely overcapacity, and a downturn in the market, the biggest similarity is that they have all been used as strategic emerging industries for key planning and support. The reason why these dilemmas occur is that the fundamental reason is due to the excessive enthusiasm and attention given by local governments to emerging industries. The PV industry and the LED industry are in a situation where there is enough lessons for local authorities and related departments. In the planning and support of industries, tangible hands should be used with caution.

In the early days of emerging industries, it may be necessary to conduct certain guidance and support with the visible hands, such as providing some incubating mechanisms, but it must not be the power to dominate the industry. This is because the cultivation and development of the industry depends mainly on the strength of market and technology, rather than relying on government planning and support to generate and grow. Because all kinds of new industries may emerge in an endless stream, it depends on the market to verify whether it has a promising future. In the end it is prosperous or is attributed to elimination. The visible hand does not have this ability.

For a period of time, there have been many local industrial plans, and the planned investment has reached 100 billion yuan and trillions of yuan. This kind of tangible hand is deeply involved in the market and economic field. There is a problem of dislocation of roles and it will bring about many side effects. The photovoltaic industry has caused a lot of investment waste, and the LED industry may be quite a few. In the past, wind power was also an example.

Therefore, as the government, the greatest contribution to the economy and society is not the direct participation in the formulation of industrial planning, nor the direct provision of various material preferences and support. The emphasis is on providing entrepreneurs and workers with excellent markets and businesses. Environment so that they can start business and compete fairly. If we only put strength on the benefits and convenience of providing land, taxation, credit, and export for the planned industries, then it would be equivalent to using the taxpayer’s money to subsidize it, leading some investors to “policy arbitrage”. At the same time, these measures do not have core competitiveness, and they will lead to major competitions in local taxation and land preferential policies. The problems of overheated investment, overcapacity, and market obstruction will immediately arise, and huge investments will then be made. Planning to change cakes.