Philips Lighting will be speeding up R&D in China to compete with established competitors in the next five years, according to a report from China Daily.

With Chinese and international manufacturers including NVC Lighting, Opple Lighting and GE accelerating the launch of their latest LED and smart lighting products into the world’s largest lighting market, Philips is allocating more than 30% of profits to R&D in China to improve innovation.

LED industry’s short product cycle is spurring innovation in the sector. Fast innovation is crucial for competing in the Chinese market, which is sensitive to new products especially those with more functions, said Olivia Qiu, Chief Innovation Officer of Philips Lighting.

Aiming to boost revenues and market share, Philips plans to release more than 1,000 lighting products in China each year, with some designed to target the local market. The R&D will also be speeding up R&D of affordable residential LED products.

The country’s telecommunication infrastructure 4G network is also growing at a rapid pace to build a solid application foundation for consumers and manufacturers.

In response to these changes, Philips Lighting will be increasing collaboration with companies from different industries including Xiaomi, Alibaba Group to make more multifunctional products that integrate cross-industry technology, and diversifies the European company’s presence in China, said Qiu.

Philips Lighting will be introducing more technologically advanced products, including smart lighting systems and products, and supplying large volumes of luminaires and equipment for sport, hospitality and industrial sectors.

Competition is escalating in the Chinese market, where local manufacturers are quickly catching up in production capacity. Chinese companies are no longer assemblers for their foreign counterparts, and are increasingly capable of independently manufacturing most of their components, while reaching high levels of R&D capacity, said Qiu.

Statistics compiled by the Ministry of Industry and Information Technology show Chinese companies accounted for 20% of global LED production in 2015, and Chinese firms produced 177.45 billion LED lamps during the first half of last year, increase of 37.33% YoY.