Subsidies are vulnerable to “policy arbitrage” LED industry revitalization cannot rely on “planning”

The cultivation and development of the industry depends mainly on the power of the market and technology, rather than relying on government planning and support to generate and grow.

According to media reports, Shenzhen recently abolished the "Notice on Printing and Distributing the Shenzhen LED Industry Development Plan (2009-2015)". The development plan was formulated four years ago. The plan is to build Shenzhen into a national and even globally important LED industry R&D and production base. By 2015, the annual industrial output will be more than 130 billion yuan. Shenzhen is the most concentrated city for LED companies in China. The local government has abandoned the development plan of the LED industry and has a symbolic significance.

Shenzhen has abolished its own development plan that is leading in China and has already been listed as an important emerging industry. There are realistic reasons. One of the main reasons is that LED products are 90% dependent on exports, and the domestic market has not been opened. Therefore, there is a serious overcapacity. Shenzhen has repeatedly seen billion-dollar LED companies failing. The second reason is that there have been some relevant plans formulated by the provinces and cities to include the LED industry as a strategic emerging industry support. Some ministries and commissions have also issued the "Semiconductor Lighting Energy Conservation Industry Plan", which has caused overheating of LED upstream investment for some time. The price of LED products has dropped rapidly, and the competition of downstream enterprises has been fierce, which has caused some enterprises to close down. Therefore, the LED industry is likely to become the second in the photovoltaic industry, becoming another industry that has been rushing and smashing, and eventually the whole industry is in trouble and the investment is seriously wasted.

In addition to the same dilemma that the LED industry and the photovoltaic industry are heavily dependent on external demand, extremely overcapacity, and market downturn, the biggest similarity is that they have been key planning and support as strategic emerging industries. The reason why these dilemmas arise is actually due to the excessive enthusiasm and attention of local governments to emerging industries. The situation of the photovoltaic industry and the LED industry, when given enough lessons to local and relevant departments, in the industrial planning and support, the visible hand should be cautious and less.

At the beginning of the emerging industry, it may be necessary for the visible hand to provide certain guidance and support, such as providing some incubation mechanisms, but it must not be the power to dominate the industry. This is because the cultivation and development of the industry mainly depends on the power of the market and technology, rather than relying on government planning and support to generate and grow. Because all kinds of emerging industries may emerge in an endless stream, it is necessary to rely on the market to verify whether they have a future, whether they are prosperous or eliminated, and the tangible hand does not have this ability.

For some time, there have been a lot of industrial planning in various places, and the planned investment amount has been hundreds of billions of yuan and trillion yuan. This kind of physical hand is deeply involved in the market and economic fields, and there are problems of dislocation of roles, which will bring many side effects. The photovoltaic industry has already caused a lot of investment waste, and the LED industry may be quite a lot. The past wind power is also an example.

Therefore, as the government, the biggest contribution to the economy and society is not to directly participate in the formulation of industrial planning, nor to directly provide various material concessions and support, the focus is on providing excellent markets and business for entrepreneurs and workers. The environment allows them to start and compete fairly. If we only put power on the land, tax, credit, export concessions and conveniences that can be planned for the industry, then it is equal to using the taxpayer's money to subsidize, leading some investors to "policy arbitrage." At the same time, these measures have no core competitiveness, which will lead to a big competition between local taxation and land preferential policies. Then the problem of overheated investment, overcapacity and market obstruction will appear soon, and then there will be huge investment floods. Planning the problem of changing the cake.

(This article is reproduced on the Internet. The texts and opinions expressed in this article have not been confirmed by this site, nor do they represent the position of Gaogong LED. Readers need to verify the relevant content by themselves.)

For more details, please see the high-tech LED special report "Shenzhen LED 'discontinued' reflection": http://

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