(Yicai Global) June 9 -- The fallout from the recent Covid-19 outbreaks in China and a sharp drop in orders from overseas are threatening the survival of the country’s ‘lighting capital’ in southern Guangdong province. Companies need to find a new set of skills in order to cling onto market share in a rapidly changing and complex business environment.

Guzhen town in Zhongshan city has been at the forefront of the country’s lighting production for the last 40 years. It accounts for 70 percent of China’s decorative light output and its products can be found in 130 countries and regions worldwide. It is home to Huayi Lighting, supplier of lights to the 2022 Winter Olympics and the theme park Universal Studio Beijing, and Shanghai-based industry giant Opple Lighting started out from here.

But times have changed. Orders have slumped by as much as 60 percent this year from the year before, according to a local industry association.

And profit margins have shriveled to between 3 percent and 5 percent this year, from 20 percent in 2019, as production costs rise and sales volume drops, said Chen Haitao, the boss of a light manufacturing plant in the town.

Guzhen, which has an area of just 47.8 square kilometers and 230,000 permanent residents, has failed to keep up with the times, Hu Gang, president of the South China Urban Research Association and a professor at Guangzhou’s Jinan University, told Yicai Global. It still sticks to the traditional ways of assembly and production as well as a direct sales model. The products are all pretty much the same and there has been little change in design and few technological upgrades. Those lights being made in the Yangtze River Delta region, which encompasses Shanghai and the surrounding area, are now proving more popular.

Moreover, much of its sales take part its lamp market, the largest in Asia and the second largest in the world. Lights shows and performances used to attract a great number of tourists. But few people are visiting these days due to the Covid-19 flare-ups.

Survival of the Fittest

The lighting industry will soon enter a battle for “survival of the fittest,” Su Zhujian, assistant to the president of Huayi, told Yicai Global. The big reshuffle that happened in the electrical appliance sector will now take place in the lighting industry.

The domestic market accounts for 75 percent of Huayi’s sales and the rest are overseas. The company is adjusting its business strategies in the face of a complex and rapidly-changing market environment.

At home, Huayi will plug into new infrastructure products, such as the building of Universal Studio’s theme park in Beijing last year. It will tap more into the markets of smaller fourth- and fifth-tier cities, optimize its products’ price-performance ratio and focus on decorative items so as to not only be reliant on standard home lighting products.

As for exports, in addition to continuing to develop the European and North American markets, Huayi will increase its footprint in Southeast Asia and focus more on cross-border e-commerce, Su said.

Editors: Liao Shumin, Kim Taylor