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GUANGZHOU, China – A year ago, China’s light-emitting diode industry seemed like a case study of industrial policy gone awry. Hundreds of factories built all over eastern China, often with lavish clean energy subsidies from state-owned banks and local governments, were operating at half capacity. The share prices of LED manufacturers were plunging.

Now demand is surging, and the Chinese manufacturers suddenly find their factories running at full tilt, churning out LEDs faster and cheaper than global rivals. With a price war underway, the Chinese are taking share from top players in the United States, Europe and Japan, the industry pioneers that made crucial technological breakthroughs, and from Taiwan and South Korea, previously the leaders in low-priced LEDs.

For some in the United States, the Chinese expansion has uncomfortable echoes of the solar panel and wind turbine industries, in which China went from a bit player to global leader through a combination of extensive government subsidies and low-interest loans from state-owned banks.

“LED lighting could see itself become the next solar, wind or other future opportunity that the U.S. will have given away by failing to address Chinese industrial policies and unfairly traded products,” said Michael R. Wessel, a member of the U.S.-China Economic and Security Review Commission, a government advisory panel.

Such industries have been at the center of increasing trade frictions between China and the United States. SolarWorld, a solar panel maker that complained to the U.S. government about what it considered unfair advantages for Chinese competitors, was later the victim of a cyberattack by Chinese military officials, according to a recent indictment by the Justice Department.

Yet LEDs represent a far more complex story than simply another industry that Western companies created and then ceded to Chinese rivals – one reason the trade issues may not play out in the same way.

The industry, for instance, is highly segmented. Chinese manufacturers are strongest in the low-wattage LEDs used for television and cellphone backlights as well as for fairly dim lamps, equivalent to 40-watt incandescent bulbs. Western companies are retaining market share for brighter, higher-wattage equipment with bigger profits. Many Chinese producers also have a poor and worsening reputation for quality, which may hurt them in the long term.

China’s rise reflects the industry’s changing dynamics.

In the last year, LEDs have finally begun to rapidly gain traction in the global lighting business. American, European and Chinese regulators have put in effect energy-efficiency rules that phase out the use of incandescent bulbs. Big multinationals that make light bulbs like Philips, Osram and General Electric have responded by embracing light-emitting diodes, which use one-fifth of the electricity of incandescent bulbs and half the electricity of fluorescent bulbs.

In Buffalo, N.Y., a specialized LED manufacturer, Soraa, is preparing to move into a state-sponsored manufacturing facility. Soraa makes high-end LED lights often used in museums and retail displays.

Environmentalists have applauded. Lighting accounts for about 6 percent of the world’s emissions of greenhouse gases, and LEDs have the potential to steeply reduce them.

For consumers, the shift has been good. Prices have fallen by nearly half in the past year for low-end, low-wattage LEDs made in China, and by 15 to 20 percent for the higher-wattage versions made elsewhere, buyers and manufacturing executives said.

With significant capacity, Chinese manufacturers could quickly increase production to meet the demand. Alice Tao, a lighting analyst at IHS Technology, a global consulting firm, estimated that very low prices had allowed Chinese companies to capture about 30 percent of the global market. That gives them the biggest share ahead of Japan, South Korea, Germany, Taiwan and the United States, which share the rest of the market in fairly even proportions.

But quality is a concern as China floods the market. Instead of lasting a decade like well-made LEDs, the low-priced LEDs occasionally burn out after less than a year, large buyers warn. More commonly, they start emitting strangely tinted light that may leave a room looking slightly pink, a little bit green or even what is known in the lighting industry as a “rainbow sherbet” palette of colors.

“What is going down is consistency – you just don’t know if you’re going to get the life span that they promise,” said Benjamin Carson, the owner of an Australian sign company that uses LEDs to make outdoor business signs.

Carson said that U.S.-brand LEDs typically cost a third more than the Chinese LEDs that he buys. But he is considering a switch to U.S. LEDs anyway because too many signs with Chinese LEDs ended up with burned-out or oddly colored sections after less than a year.

Other buyers are even more cautious. “We do not buy Chinese LEDs,” said Mike Pugh, the procurement director at Xicato in San Jose, Calif., a large provider of indoor lighting systems for retailers and hotels. “We just can’t take that chance.” Xicato instead buys LEDs from multinationals like Cree of Durham, N.C.; San Jose-based Philips Lumileds; and Osram Opto Semiconductors of Regensburg, Germany.

The Chinese industry, with heavy debts from an earlier spasm of investment, is still largely relying on factory equipment purchased from 2009 to 2011. But with sales growing fast, Chinese companies started ordering considerable new equipment from Western suppliers early this year, which could improve their reliability.

But hanging over the LED industry have been trade frictions in the solar panel industry, which uses many similar technologies. The United States and European Union have both accused the Chinese government of violating global trade rules by providing export subsidies for solar panels, which China denies.