31 March 2016
Huge Opportunities in Turkish Lighting Market, but Challenges Remain
With Turkey's construction industry still in robust form and with a lack of domestic LED manufacturers, there are real prospects for external suppliers in the sector, but only if improved quality control and client service can be assured.
The Light Emitting Diode (LED) market offers huge business opportunities for Chinese companies in Turkey, according to exhibitors at Istanbul's 11th annual LED Systems, Technologies, Applications and LED Lighting Exhibition. A number of challenges remain, however, including stiff price competition and lingering doubts over the quality and reliability of Chinese-made products. Turkish consumers and distributors are also looking for more aesthetically pleasing products, as well as those that consume less energy and emit a more natural light spectrum.
Turkey currently has no domestic capability for manufacturing LEDs. In 2012, the country imported around US$16.1 billion worth of electronics, mainly from China. A high-profile example of this is the 300 square meter LED display screen at champion football club Galatasaray's new stadium in Istanbul, a fixture installed by a Shenzhen-based company.
Significantly, though, the construction sector in Turkey remains buoyant. In line with this, a two-year plan has been put in place to replace seven million old fashioned street lights with more modern, energy-efficient LED illumination.
Due to the relatively light weight, compact size and high value of LED products, they can be transported quickly and economically by air. This is in contrast to other, heftier light sources that are obliged to use slower – but cheaper – surface shipping in order to remain price-competitive.
One distributor, Shining Jia Min of Zhongshan-based Discovery Lighting, provided a telling example of the potential cost savings for Turkish businesses buying Chinese-made LEDs, even after transportation and import taxes have been factored in. Her company sells 800 lumen A60 9-12w LED bulbs for $0.9, while the same product in Turkey costs around 50% more.
Halyn Jiang, a Sales Manager with Shenzhen-based Runlite, was a first time visitor to the Istanbul fair. He said: "We believe Turkey is a very big potential market for us. We must first assure customers that we have a highly efficient factory and excellent knowledge of the certification process. We recommend they come to China and see our set up. We already have some customers in Turkey but, of course, we want more."
Runlite was founded in 2006 and now has 700 employees and a turnover of $60 million. Explaining the company's philosophy, Halyn said: "We don't want to engage in price fighting. We can sell a single LED or a whole printed circuit board, but our profit margins are low, between five and 10%. This is how we remain competitive."
While Turkish buyers have an appetite for low-cost Chinese products, some doubts over quality and reliability still remain. Biliam Xiong, a Sales Executive with Shenzhen-based Etop, was exhibiting for the third time in Turkey, selling power supply components. He said: "Price is the most important thing here, but quality is vital, too.
"In our industry, the quality of goods can sometimes vary considerably. There are many customers in Turkey, but they have to be reassured that the products will be reliable."
Selcuk Kemanci is a Turkish quality control consultant based in Hong Kong. He works for a wide range of customers, including the Pentagon, the headquarters of the United States Department of Defence. Explaining the continuing appeal of mainland manufacturers, he said: "European brands are very, expensive so it is understandable that people look to China.
"Factories in China are very modern, often with a high level of automation. Some of the biggest names in Turkish electronic goods assemble their products domestically using Chinese components and then simply badge them up. The most important thing is to find a reliable Chinese distributor."
Another to see signs of improvement among Chinese manufacturers is Aynur Dumlupinar, Sales and Marketing Executive with Istanbul-based YMB, part of the powerful A Grup, one of Turkey's leading electrical goods manufacturer. She said: "We buy a lot of raw materials from China and use them across a range of products, including lighting for hospital operating theatres. I would say reliability is improving with the younger generation having learned from the mistakes of the past.
"Price is sometimes a problem, though. You can be quoted widely differing amounts for what appears to be the same product. Are the specifications really different or is someone trying to make a bigger profit? Sometimes it is hard to tell."
Price and reliability are not the only concerns raised by many Turkish buyers. With LED lighting becoming a more mature technology, manufacturers now need to add more value in order to win orders in a crowded market place, while good business support is expected as standard. Highlighting this, Dumlupinar said: "Our customers are becoming much more sophisticated and demand more aesthetic lighting, even in the public sector. For Chinese manufacturers, the key is to be innovative and flexible. They must also know all about customs procedures and certification as a number of our imports have been hit by documentation problems."
Ilker Aracikan, General Manager of Istanbul-based Ilker Electronics, one of the most well-known distributors in Turkey, said: "We sell to 20 countries, including France, Germany, Iran and Iraq and have been working for more than 25 years with Chinese companies. I used to go to China around 12 times a year, but nowadays only make four annual visits.
"We are happy with our business partners, but costs are rising. They have gone up by around 50% this year, of which around 20% is Turkish taxes. In light of this, Chinese companies have to stay competitive."
Yunus Kayan, of Istanbul-based Demsay Elekronik, is also happy with the company's current network of Chinese suppliers. In the nine months to September 2015, Demsay imported more than $1 million worth of products from China. He said: "We supply to a range of Turkish firms, including elevator manufacturers. If someone needs a part urgently we can usually supply it within one week."
Taking a different tact, Berk Turgut, a Sales Executive with Vestel, one of Turkey's biggest electronics companies, said: "The future is in higher efficiency, better energy saving and improved colour rendering."
Mr Turgut believes that, globally, the LED industry is still grappling with certain technical problems, including glare and issues with uniformity when lighting large areas. He said: "There is no going back. It all starts with return on investment and LED is definitely the future."
In terms of the event itself Dğoukan Köse, a representative of the organising company, the Marmara Fair Organisation, noted that a growing number of Chinese companies were now attending the show. While seeing this as a possible indication of the great potential for mainland electronics manufactures in Turkey, he also struck a cautious note with regard to the cutthroat nature of the market.
He said: "This is a very important event for Chinese manufacturers and distributors. If they don't know the market place, though, they are like a dog set on by a pack of wolves. It's best that they come here to find partners and co-distributors.
"Last year we had seven exhibitors from China. This year there are 16 and we have installed a special pavilion for them."
Overall, Köse saw the LED sector as fast moving and demanding constant technical innovation in order to stay competitive. He said: "The technology is getting smaller, better and cheaper. The layers of conductive metal in LEDs, for example, have improved heat control and made fans redundant.
"Competition is fierce, but for the stronger Chinese companies there are rich rewards here."
The LED Systems, Technologies, Applications and LED Lighting Exhibition was held at the Istanbul Expo Center from on 1-4 October. More than 120 companies exhibited at the event, which attracted electronics buyers and architectural specifiers from Turkey and beyond.
George Dearsley, Special Correspondent, Istanbul