Commentary: China new LED lighting subsidy policies to focus on commercialization


The subsidy program for upstream LED firms in China ended in 2011. There are many LED firms in China, but less than 20 of them have economies of scale and capacity of more than 20 MOCVD tools. To help the LED industry, the China government has been considering new subsidy programs to expand commercialization and promote international recognition of China-made LED chips.

Three levels of subsidies to lower LED light bulb prices

China's government will soon announce a new LED lighting product subsidy program. Various departments have been announcing several layouts of targets for the LED industry listed in the 12th Five-Year Plan since November 2011. The new subsidy program is likely to be an extension of the previous program by having the government purchase large amounts of products and provide subsidies to the end market firms. This will help the firms to decrease product prices.

The China government will set three levels of LED subsidies as it did before. The first is for the central government to provide subsidies to LED firms to lower production costs. Second, provinces and province-level municipalities will set up policies to subsidize customers. The third level is for other regions in the country to provide incentives. The price difference of LED and incandescent light bulbs will likely narrow significantly because of these policies.

Push-and-pull policies

The China government began LED projects with replacing street lamps. The reason was that LED street lamps could conserve energy most significantly.

Nevertheless, LED street lamps require high-power LED chips which most China-based LED firms lacking the technology. Hence, most of the LED chip providers have been international firms. The China government has been hoping to increase the percentage of LED chips made domestically by encouraging the cooperation between domestic and international firms.

The redefined subsidy program will depend on specific regional characteristics. If the region has a maturing LED street lamp industry, then the government will continue encouraging the growth of the industry while accommodating the indoor lighting policies set by the 12th Five-Year Plan.

Another important goal is to commercialize LED lightings such as setting up the Energy Management Contract (EMC) system. So far, there have not been many successful cases because the insurance mechanism and credit standards have not been able to cooperate smoothly. 


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