China's LED industry will accelerate mergers and acquisitions (M&A) in a plan seeking to foster world-class brands.
In a development plan jointly released by 13 government agencies, China aims to achieve breakthroughs in key technologies in the LED industry to expand market value to 1 trillion yuan (148.6 billion U.S. dollars) by 2020.
China should have at least one LED company with sales volume of more than 10 billion yuan, and one or two world-renowned brands, according to the plan.
The government will encourage more M&As in the industry to push concentrated and differentiated development in the sector.
The news gave a boost to related shares. On Monday, Foshan Electrical & Lighting went up 1.34 percent to close at 9.1 yuan per share, while Zhejiang Quartz Crystal Optoelectronic Technology gained 2.4 percent to 23 yuan.
LEDs are semiconductor light sources that are more energy-efficient than incandescent bulbs. During the 12th Five-Year Plan period (2011-2015), China made the LED industry a strategic emerging industry in efforts to advance high-tech manufacturing and tackle climate change.
The industry has since taken off -- China has become the world's largest producer, consumer and exporter of LED products. In 2011-2015, the sector's output value grew at an annualized rate of around 30 percent.
In 2015, the industry output value amounted to 424.5 billion yuan, up 21 percent year on year, while exports of LED products came in at 12 billion U.S. dollars, rising 15 percent as China's LED industry is more and more reliant on overseas markets.
The number of listed firms in the sector has grown from two in 2010 to 25 in 2015, and two of the firms have made their way to the global top 10.
The way up in the international market was partly driven by Chinese M&As. In 2015, China's Puhuarui Photoelectricity acquired full equity in BridgeLux Inc., a leading U.S. developer and manufacturer of solid state lighting technologies.
In 2013, Luminus Devices, a U.S. seller of solid-state lighting products, was sold to Chinese LED maker San'an.
And with the recent development plan aiming to foster leading global companies, analysts expect M&A activities to quicken as China has a large number of companies, mostly small, in the business.
Liu Rong, president of HC SemiTek Corporation, said the government plan offered opportunities for his company to strengthen international cooperation on research and development of LED products to become a leading company in the global market.
Domestically, China's rapid urbanization and top-level plans such as "Made in China 2025" will create more growth potential for the sector.
In May 2015, China introduced the Made in China 2025 blueprint, listing several tasks for the manufacturing industry, including boosting innovation, fostering Chinese brands and enhancing service-oriented manufacturing.