Regardless of the area where LED lamps are required, there may emerge some doubts when it comes about setting a proper sourcing strategy for this category. LED lamps in Brazil can be procured from local manufacturers, but also it lurks the possibility of importing them from low-cost countries. Opting for one of these two strategies can be quite controversial.
In recent years, LED lamps consumption has positively evolved in Brazil. This increase in the demand is explained by high local electricity costs and a drop in LED lamps manufacturer’s costs all over the world. What is more, governmental regulations have prohibited the production and commercialization of incandescent lamps in the country, encouraging the choice of LED lamps. Thus, 30% of lamps sold in Brazil during 2015 accounted for the LED type; whereas estimates for 2020 forecast that this percentage will reach 70%.
Basically, Brazilian LED lamps market is dominated by imported items, since 90% of the lamps sold in country are from foreign origins. Besides, 95% of these imported products are manufactured in China. However, in recent years some local firms have begun to produce LED lamps with the aid of imported components.
At this point it is important to remark that there are not any players in Brazil that manufacture LED lamps with 100% of local components, since most of the firms import some or all the materials and assembly them locally. Furthermore, local government is also encouraging native industry by setting up different import taxes for LED lamps and their components, 18% and 12% respectively. Thus, locally assembled LED lamps account for 10% of total LED lamps sold in the country. This initiative is being undertaken by a group of 20 companies. Most of these firms are SMEs located in Sao Paulo.
Regardless of the area where LED lamps are required – residential, commercial, industrial, and advertising, among others – there may emerge some doubts when it comes about setting a proper sourcing strategy for this product. As mentioned previously, LED lamps in Brazil can be procured from local manufacturers, but also it lurks the possibility of importing them from low-cost countries. Opting for one of these two strategies can be quite controversial, and this situation was especially frequent during local currency devaluation in 2015.
For this, if the decision arrived at consists on sourcing LED lamps from Brazilian firms, it is important to bear in mind some advantages and disadvantages of this strategy. First of all, it is going to be an end-to-end solution -with all the benefits that this implies. Moreover, taxes paid for imported components will be lower than the ones corresponding to imported goods, having an impact on the final sales price. Nevertheless, in this case, suppliers will have little experience in LED lamps manufacturing and will probably offer simple products. Besides, economies of scale are not generally achieved by them.
On the other hand, if the final choice focuses on sourcing from Chinese manufacturers, import processes will be needed and taxes for importing this kind of product will be higher than the case of imported components. In return, it will be possible to engage with very well experienced suppliers that offer complex and high quality products, and are part of a highly competitive industry where economies of scale are generally achieved.
For sure, there is not a single LED lamp sourcing strategy that best fit all the cases and needs magically. It will be necessary to evaluate the current situation in order to decide if it is better to procure from local or foreign suppliers.