Future small and medium LED companies may be on the verge of desperation

For LED companies, the business is small and financing is difficult. Recently, Shenzhen Leixing Optoelectronics Co., Ltd. collapsed, and it was coincidental that Shenzhen Everlight Technology Co., Ltd. was also in a crisis of closure.

“The main reason for the collapse of Leixing Optoelectronics and Shenzhen Everlight is the breakage of the capital chain.” Wu Chaoguo, a research fellow at the China Industry Intelligence Network Industry Research Institute interviewed by a reporter from the “China Sankei Shimbun”, said that in fact, with the LED industry, some companies With problems such as the breakage of capital chain and poor management, the entire industry will enter the integration stage and the intensity of shuffling will increase.

The collapse of the LED companies seems to have caused the capital chain to break due to default on the suppliers’ arrears, or the need to pay back debts, which ultimately led to the company’s insolvency. In fact, the collapse of the above two LED companies is just a shred of shrimp under the market economy. Many companies with billions of yuan worth of companies such as Duo Duoli, Bolent, and Vision Optoelectronics have also closed down due to the capital chain, which seems to have become a common problem in the entire industry.

According to Qiu Mingliang, a research fellow at China Research Institute of Cape Town, the LED market is saturated, and the industries are eager for quick success, excess production capacity, and vicious competition. Various enterprises are mixed and everybody is insisting that they must produce at a loss. In the entire industry, most of the SMEs are doing downstream LED lighting products, and small workshops are everywhere. Due to the relatively low capital requirements for terminal companies, entry barriers have made the competition in this area extremely fierce.

According to industry statistics, there are more than 10,000 companies engaged in LED lighting in the country. In the first half of 2013, the utilization rate of domestic LED lighting companies was only about 60%.

"In such a market situation, the LED industry has re-emerged as the capital's favorite. Like Shanxi Coal, Furi Electronics, BYD, etc. have entered the LED industry." Qiu Mingliang told reporters for example.

From the surface, it seems that the direct cause of the failure of the capital chain led to the failure of LED companies. Is this true?

Wu Chaoguo told reporters that in recent years, the LED display industry has developed rapidly and the country has vigorously supported it. Under many temptations, companies have joined the market one after another. For enterprises participating in the LED demonstration project of government investment projects, Shenzhen grants subsidies of 10% according to the price of the lamps and discounts interest for 3 years. The enterprises that undertake LED application demonstration projects for corporate investment projects are given a 30% subsidy according to the price of lamps and lanterns.

"On the one hand, the government strongly supports the LED industry. On the other hand, due to immature technical conditions, products cannot be promoted to a larger market. Finally, government procurement has become the only sales channel for LED companies and a vicious circle has formed." Wu Chaoguo believes.

From the current point of view, the pattern of companies engaged in the LED industry in the market seems more and more clear. On the one hand, the leading enterprises in the industry have continued to increase their profitability under favorable policies. Some promising “outsiders” are also optimistic that the future of LED will also be a part of the industry; on the other hand, small businesses with less and less technology Overcapacity in the industry caused the capital chain to be forced out of the market.

Qiu Mingliang believes that in the future, market share will become more concentrated in enterprises with brands, channels, and innovations. The industry will face reshuffle, and a large number of SMEs may withdraw from the competition.

Wu Chaoguo stated that how to increase consumer awareness, innovate technology, and establish a reasonable industry standard are still the key issues for the entire LED industry. The long-term development of enterprises can not blindly pursue profits, identify their own market positioning of enterprises and then positioning their own products, planning business development path, do their own product quality, while controlling their own business funds, do not blindly expand the company's production scale, In order to grow healthy.