Where is the LED industry risk aggravation?

The term LED is full of charm for many investment companies in recent years. Under the guidance of various favorable policies of the country, the domestic LED industry has created a wave of crazy investment boom in the past two years. Stimulated by the ever-expanding earnings expectations, huge capital investment has created many projects with more than 100 million yuan. This year, involving the continuous collapse of LED companies really poured a plate of cold water for this industry. With a large amount of capital investment, immature technology, and vicious competition and other unfavorable market practices, the LED industry continues to increase its risk.

Zhongshan billion LED enterprise closure

On July 2 this year, a lighting factory owner in Zhongshan City, Guangdong province, who suddenly exceeded one hundred million yuan, did not know how to finish. Behind him was a loan of more than 50 million yuan and hundreds of workers' wages. Recently, the Guzhen Town Government of Zhongshan City reported that the operators of the Xiongji Lighting Factory suspected to have escaped hiding, were suspected of contract fraud and refused to pay labor compensation. Local public security officials have initiated criminal procedures to form a task force to arrest Xie and other involved persons and transport the inventory to the warehouse for storage. At present, the wages of more than 300 Xiongji employees who are in arrears of more than one million have been advanced by the Guzhen Town Government, and the sales of more than 40 million of the 38 suppliers of Xiongji are still not in place.

It's not new for a business owner to run out of business. But the reason why the lighting factory named Xiongji attracts people's attention is that the company has transformed LED production in recent years. And this year, many domestic LED manufacturers have collapsed, including many companies with a scale of over 100 million and even over 100 million.

Vicious competition as the cause of closure

The reporter learned that since 2010, with the country increasing investment in the LED industry, the introduction of various favorable policies has led the LED industry to enter a frenzied investment phase. The unlimited desire for the future market gains has led many traditional lighting companies to point their fingers at LEDs, and Hsiung Kee is one of them.

These hurried-turned companies are often very backward in technology, even if the production line is based on traditional lighting ideas. The low-end technology makes the product less competitive and can only take the low-cost route to seize the market. It is understood that taking Xiong Ji as an example, the price of LED bulbs produced by the company is only 3.8 yuan. According to this price, even the cost is difficult to fill. The final result of robbing the market at a low price is to lead this lighting company with a scale of over 100 million yuan to be the first to die in the Chinese LED market.

In fact, according to industry sources, there are still many manufacturing companies like Hung Kee. At present, Guangdong Zhongshan is a concentrated area of ​​the LED industry. According to statistics from the Science and Technology Bureau of Zhongshan City, there were more than 1,200 LED companies in Zhongshan in 2012, of which nearly 100 were above-scale enterprises and employed more than 70,000 people. In 2012, the output value reached 35.65 billion yuan. yuan. Only one area in Guzhen is the largest professional lighting production base and wholesale market in China. In 2012, the total output value of lighting products reached 15.81 billion yuan, accounting for more than 60% of the national market share. Many of these companies do not have upstream core technologies and only produce in the form of production and processing. The rapid increase in the number of companies and overcapacity have caused them to have to lower sales prices in order to compete for the market. However, with a certain technical content of the LED industry, to keep prices down and maintain production, many companies have begun to reduce costs in parts and materials and processes, and its products are extremely difficult to guarantee quality. This vicious competition has directly led to the current slump in the domestic LED production industry.

Industry regulations are urgently needed

“The government supports the development of the LED industry in terms of policy, but there is no guarantee in the technical specifications of the industry.” Some people familiar with the LED industry pointed out that the LED industry, which nowadays seems to be in full swing, is actually struggling. It is understood that the domestic LED industry started relatively late, most of the domestic companies do not have any core technology, most of the technology patents are in the hands of some large foreign companies.

Without technical support, the practice of expanding market size at low prices has now proved to be unsuccessful. "Technically controlled by people, and more importantly, the industry standard vacancies." The above-mentioned sources told reporters that at present, many people think that LED is a gold mine, as long as you can get into it and you can make money. Under this kind of thinking, very few companies will subconsciously engage in technology and R&D. In fact, the technology update of this industry is very fast. From 2010 till now, in the crazy investment in the LED industry, the upstream epitaxial chip area has been the most involved. Due to the huge amount of funds required, the domestic projects with billions and billions of dollars have been seen in the past two years. However, these projects have rarely seen bright spots, and most have become a means of financing.

The bankruptcy of Hung Kee once again sounded the alarm for the LED industry. At the same time, it has also attracted the attention of government departments. As the largest gathering place for LED industry, it is understood that Zhongshan City, Guangdong Province has been preparing the “Zhongshan LED Industry Development Plan”, which will formulate LED industry development policies and strengthen industrial planning on the agenda.

Industry cooling or providing opportunities for change

This year's wave of LED closures has caused many companies blindly investing in the industry to be vigilant. According to data from the LED industry research institute, China's LED industry increased its planned investment by 37 billion yuan in the first half of 2013, a year-on-year decrease of 16%. In 2013, the LED industry investment hotspot has shifted from the upper sapphire and epitaxial chip areas of the previous two years to the field of downstream application lighting. In the first half of 2013, the newly planned investment in the field of LED lighting was 23.2 billion, accounting for 63% of the total new planned investment, which was a decrease of 19% year-on-year.

According to statistics, the newly planned investment in China's LED industry in the first half of 2013 hit a new low since 2010. After crazy investment in the past two years, the LED market situation is quite severe. In 2012, there was a serious surplus in the upstream epitaxial chip market, and industrial investment has already returned to the signs of rationality. Analysts pointed out that for enterprises lacking technical support and financial strength, the cooling of the industry provides a chance for change. After more than two years of large-scale investment, LED lighting production capacity in the country has now been fully established. The cooling of investment will alert companies that are still planning to go into business.

At present, investment in China's LED industry has become more rational, especially in the field of epitaxial chips and sapphire, and the heat of investment is also rapidly dissipating. The analysis pointed out that the current development of the LED industry is more biased towards the development of core technologies and the application of new material technologies. "If you invest a huge amount of capital without the advantages of technological scale, the future of the LED industry will still be a bad one."