Response to US Tariff Barriers: The LED Industry’s Calm Response

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On 04/23/2025

Recently, the United States issued an “equivalent tariff” executive order that severely undermines global free market principles. The order imposes an additional 34% tariff on products imported from China, with a potential increase to 104%. What impact does this have on China’s LED industry, which is highly export-oriented?

Table of Contents

Strong Foundation Ensures China's LED Industry's Calm

For China’s LED industry, its market is highly dependent on overseas demand. Leading companies like Leyard, Absen, and Unilumin derive more than half of their revenue from international markets. Additionally, industries indirectly relying on LED components, such as backlight sources for LCD displays, also have more than half of their markets overseas. Moreover, China is a major supplier of LED lighting, components, and display screens for foreign companies, including those in the U.S.

Such heavy reliance on overseas markets might give the illusion that China’s LED industry would be disability by U.S. tariffs. However, the reality is different.

Firstly, China’s LED industry controls 70-80% of global production capacity and, based on purchasing power parity, invests at least 80% of global R&D expenditure. Leading-edge Micro LED display products are produced at scale only by companies in mainland China and Taiwan. This scale and technological innovation make China’s supply “irreplaceable,” at least in the short term.

Industry experts point out that LED applications are widespread globally. For example, lighting is not only needed by the U.S. With the continued expansion of LED applications, the market share of new demand in the U.S. is shrinking. The dependency of Chinese LED companies on foreign markets is global, not solely on the U.S. The decreasing proportion of U.S. LED consumption in the global market is a natural trend.

Thus, understanding “who needs whom” and the asymmetric global influence of the U.S. versus China’s supply capabilities is crucial. The notion that “U.S. tariffs will lead to collapse” is quickly dispelled when comparing the two.

Secondly, China’s LED companies have been preparing for the U.S. tariff war and trade friction since 2018. By diversifying their overseas markets, establishing production and processing facilities in North America and Eastern Europe, and building partnerships with international counterparts, Chinese LED companies have already reduced their reliance on the U.S. market.

“Not decoupling from the U.S. market does not mean binding the U.S. market!” Industry insiders emphasize that the U.S. market is no longer the “innovation launch market” for LED products nor the “largest demand market”—these roles now belong to China. Moreover, the U.S. is not the key market for LED application growth; for instance, Southeast Asia’s market growth is surpassing that of the U.S. in 2024.

One factor is the vast domestic potential of the Chinese market, and another is the technological innovation that China is bringing to global consumers. As a result, China’s LED companies have become less reliant on the U.S., focusing more on non-U.S. markets.

China's LED Industry Holds the "Initiative Advantage" in the Global Supply Chain

In the ongoing global restructuring of supply and consumption chains, China’s LED industry, with its technological leadership and dominant production capacity, holds the initiative. On one hand, the U.S. macroeconomic policy remains uncertain, with increasing recession risks, making it a less ideal destination for new production capacity investments. On the other hand, the matching of market and supply is undergoing a shift. For example, while Taiwan’s LED companies may increase their market share in the U.S. due to tariffs, this will likely reduce their supply to other regions globally—a redistribution of supply rather than a change in total supply.

Building a supply chain outside China’s LED industry is challenging. Experts point out that China’s LED industry dominance is the result of over two decades of sustained effort, including investments in R&D, technology, and infrastructure. This advantage encompasses not only “scale and affordability” but also technological leadership, skilled labor, a complete industrial chain, and proximity to end customers.

For instance, gallium, a key strategic metal for the LED industry, is produced predominantly in China. In 2023, China produced 701 tons of gallium, accounting for 96% of global production. In contrast, the remaining 4% serves military applications. China also leads in the production of aluminum and zinc, essential for LED manufacturing.

Thus, China’s LED industry’s advantages go beyond the manufacturing of “displays or light bulbs.” They encompass a full range of strengths from materials, technology, and talent to production capacity, innovation, and equipment. Replicating or surpassing this advantage is no easy task.

Confidence Amid U.S. Tariff Bullying

Given these reasons, China’s LED industry remains confident in the face of U.S. “tariff bullying.” For example, Absen has stated that in 2024, exports to the U.S. will account for about 15% of their total revenue, and while this may decrease slightly, the company operates in over 140 countries, so the long-term impact on its business is limited.

Market Laws Will Not Fail Due to "Artificial Factors"

Shortly after the U.S. announced its “equivalent tariff” policy, North American lighting companies Acuity Brands and RAB Lighting announced price hikes on related lighting products.

Acuity Brands stated that it had already announced a price change weeks ago, effective March 31, 2025. However, due to the ongoing changes in tariff policies, they will conduct a second round of price adjustments. RAB Lighting mentioned that the latest U.S. tariff policy significantly impacted their supply chain costs, prompting them to adjust prices by May 3, 2025.

Both companies, which hold substantial global market shares, adjusting their prices in the U.S. market highlights the fundamental market law that “tariffs are largely borne by consumers.”

Industry insiders emphasize that irrational tariff policies only distort the market value chain and supply chain. Ultimately, these policies harm consumers and suppliers but cannot alter basic market rules. The rise, shift, and clustering of the global LED industry are a result of objective market forces, not easily altered by a single country’s tariff policies or the preferences of foreign leaders.

In fact, modern tariff policies are primarily financial in nature. They tend to be used by countries with weak currencies to protect limited foreign exchange reserves or international payment methods, thereby maintaining national currency credibility. From a global economic development perspective, high tariffs are typically associated with weak currencies, while low tariffs are associated with strong currencies.

The Unavoidable Correction of Tariff Mistakes

The protective role of tariffs is secondary to their financial attributes. When tariffs are used to protect industries that do not have a “comparative advantage,” they can lead to market imbalances, reduce the economy’s self-adjusting capacity, and foster monopolistic forces benefiting from tariff protections. This weakens national economic competitiveness and harms consumer welfare.

Recently, both domestic and international economic experts have pointed out that the U.S.’s tariff measures will ultimately harm itself. This is determined by objective economic and market laws, often referred to as the “invisible hand” of the market, which will naturally correct these errors—either through voluntary corrections by policymakers or passive corrections driven by market forces.

Conclusion

In conclusion, strengthening its hard power and aligning with objective market rules forms the dual foundation of China’s LED industry’s confidence in facing U.S. tariff bullying. While short-term chaos and volatility may be unavoidable, the long-term prospects are bright. As long as the industry continues to build on its internal growth momentum, follow objective economic laws, and maintain its comparative advantages, China’s LED industry will continue to thrive and succeed.