Sino US Trade War To Rekindle Malaysia LED Manufacturers Or Benefit From It

- Jun 28, 2018-

Since the trade war between the United States and China, many circles have speculated whether this will lead to serious economic and geopolitical instability. But for a particular industry, the impact of tariffs depends on the Microeconomics of their products: the impact of rising prices on demand? Is there a ready substitute? How much extra capacity is there in the world? How long is the cycle of new manufacturing and operation?

Daniel Rosen (Daniel Rosen), a partner at Rhodium Group, an economic research company, said: "every product and each supply chain has different effects. No one can honestly assert that the overall impact of Sino US trade war is at hand. (if anyone says he can), he may also predict the weather of a certain Tuesday afternoon next year.

This spring, the United States will levy the first tariff, and the 1102 commodities involved will eventually be a few joys and worries. In order to understand the development of the situation, we can study the different trade patterns of these commodities, the parts of the thousands of letters of opinion submitted by companies and industry groups to the US trade representatives. Executives and other experts have their own views on whether the supply chain will reorient and the price of specific products will change.

The lesson we have learned is that we should be skeptical of the recent prediction that the main industries will be overturned. At least for now, companies can choose to avoid some of the most serious risks.

But the longer the trade dispute lasts, the more kinds of products will be spread. The bigger the differences between the United States and China and the rest of the world, the more problems the United States needs to worry about. In the face of trade wars without definite goals and uncertain terms, the company's current expediency strategy may not be successful.

LED: the gap industry that other countries can fill

China is the second largest economy in the world, and also the main supplier of US retailers. In addition to China, some commodities have a large number of suppliers worldwide, and these commodities have become the first round of tariffs imposed by the Trump administration.

The Pedersen Institute For International Economics (Peterson) has made a new analysis of the government's published data - a trade war involving the source of the product. The results show that half of the products imported from China are less than 10% of the products affected by trade war waves and the other products from China, and some of the other products imported from China have a large proportion. Therefore, the share of China's market share is 23% by the weighted average method. In short, China does not have an absolute monopoly in the industries where tariffs are added, or even the share is not high.

Install new LED street lamp.Rebecca Cook / Reuters in Detroit

Take LED as an example, this small element used for LED bulb luminous parts has a wide range of applications. Last year, the United States imported $637 million worth of LED from China, which is higher than that of the United States from any other country. But that does not mean that China is the only supplier: the total value of LED imported from Japan and Malaysia to the United States has reached 593 million dollars.

Therefore, China is not the only option for US companies importing diodes to assemble solar street lamps. The question is whether other countries that are not subject to 25% tariffs will be able to meet this demand in the face of the surge in potential demand.

The LED industry in Malaysia has seen a glimmer of opportunity.

A 40 minute drive from Kuala Lumpur, capital of Malaysia, has a company called OverSea Lighting And Electric. Daniel von (Daniel Fong), senior manager of the company, said: "if this trade war is going to continue to move towards tariffs, we will benefit from it. The US market is cutting off all ties with China. From this point of view, the export of products made in Malaysia to the United States will bring us more business opportunities. "

Jamie Fox (Jamie Fox), an analyst at IHS Markit lighting accessories, said Malaysia's lighting industry has been difficult to enter the U.S. market, partly due to China's preferential subsidies to local LED companies. A key device needed to make a diode is sold for up to $2 million, but thanks to China's local subsidies, Chinese companies need only half the price to buy such a device, which makes the competitive enterprises outside China at a price disadvantage.

If tariffs reduce the competitiveness of Chinese exporters, the scales may be tilted. John Sii (John See), the chief executive of QAV technology, said that if there was a demand, his company's two LED factories in Penang could rapidly increase production by 300% to 400%. He hinted that Malaysia would not be relegated to China after its trade with the United States.

For American importers, it is very easy to use the LED produced by other countries instead of China's imported LED products because these components are relatively standard parts. The main problem is price and availability.

However, some other Chinese products affected by tariffs may not be able to find substitutes easily.

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