China's LED industry is in trouble

In the past few years, tempted by policies and potential for growth in the future, coupled with low barriers to entry, various sources of funds have lumped together the LED lighting industry, causing vicious downstream competition, corporate profits have fallen sharply, and there has been a wave of closures.

The dilemma of LED lighting "panic" and "confused" can be the current mentality of LED lighting companies. According to media reports, Shenzhen Vision Optoelectronics Co., Ltd. caused the company to close down due to capital chain issues, and the majority shareholder penalties were passed. At present, Vision Electronics not only owes the salaries of more than 400 employees, but also owes more than 380,000 yuan to the project, and may owe more than 10 million yuan to the Hangzhou Bank.

“This is certainly not the last one. There will be more LED lighting companies going out of business in the future.” A market development person who once worked at Vision Electronics instructed China Daily. In fact, in Shenzhen last year, there have been more than one LED business owner "running."

Vision Optoelectronics' boss “Running Road” incident is not a case, it reflects the industry's downturn. As of the end of 2011, there were more than 80 LED lighting companies that closed down in Shenzhen, and Foshan, which is located in the Guangdong Province, was close to 10% of LED lighting companies in mid-2011. Following Shenzhen and Foshan, LED lighting companies in Dongguan and Zhongshan are also in deep trouble.

The increasing number of stocks disclosed by listed companies also shows the industry's predicament. According to the 2011 annual report of listed companies, the inventory of Lehman Optoelectronics (300162), Sanan Optoelectronics (600703), Qinshang Optoelectronics (002638), and Qianzhao Optoelectronics (300102) were RMB 100 million and RMB 918 million, respectively. 164 million yuan and 127 million yuan, an increase of 73.31%, 195.88%, 61.58%, and 219.16%.

“Since last year, the company’s LED inventory has continued to rise. By the end of the year, the company couldn’t hold on. It only gave workers vacations, waited for the market to pick up and started again, and it hasn’t started yet.” A person working in a LED company told the China Daily News reporter.

A Lamp owner who did not want to openly identify with the China Business Daily said: "Many companies actually rely on export tax rebates to maintain their operations." However, the export market has also seen a decline.

Relevant data show that since the second half of last year, the domestic market for LED lighting exports to Europe and the United States has dropped by about 40%. The company's statement further confirmed the authenticity of the above data.

“This year, our export orders fell by 10% to 20% year-on-year. At the same time, our company plans to export 100 million yuan this year, which is down compared to last year.” A person from Guangdong Zhaoxin Lighting Co., Ltd. told China Business Daily reporter. Cai Yahui, chairman of Shenzhen Baochengxin Optoelectronics Technology Co., Ltd., also stated that the company's exports to Europe and the United States, including the Americas and Europe, fell by 20% at the end of last year, and nearly 30% at the beginning of this year.

The reduction in orders directly led to a decline in the operating income of many companies. According to the statistics of the Guangdong Guangya Lighting Research Institute, the 2011 annual results report released by 12 lighting companies listed from last year to the first quarter of this year showed that only Shanghai Everlight and Jianshe Optoelectronics (300269) have maintained a slight growth rate. To increase, the growth rates of the other 10 companies have declined to varying degrees. Of these, the long-term lighting (300301), which maintained a growth rate of 234% in operating revenue in 2010, had a growth rate of only 57% in 2011. Wanrun Technology (002654) performance even zero growth.

Low-level blind investment "At this stage, China's LED lighting products, the main market is still concentrated in Europe and the United States developed markets, especially the European market. Europe and the United States economy is sluggish, LED exports blocked, resulting in the entire industry more difficult. Guangdong as the leader of the national LED industry The impact was also more pronounced.” Wang Dianzheng, honorary president of Shenzhen Semiconductor Lighting Industry Development Promotion Association, told China Business Daily.

The economic downturn in Europe and the United States is indeed an important reason for the dilemma of the LED lighting industry. However, in fact, blindly gathering all kinds of funds is the fundamental reason why LED is in trouble. The enthusiasm of the capital for LED enthusiasm has largely “gained” the increasing support from the national and local governments in supporting the industry.

In 2009, six departments including the National Development and Reform Commission jointly announced the “Opinions on the Development of Semiconductor Lighting Energy-saving Industry”. In the same year, the Ministry of Science and Technology launched the “Ten City-Million” semiconductor lighting application demonstration city plan; in May 2011, Beijing, Changzhou, Hefei, Qingdao and Guangzhou , Haikou, Baoji and other 16 cities have been confirmed as the second batch of “Ten Cities and Ten Thousand Cities” model cities; in November, the National Development and Reform Commission issued the “Outdated Incandescent Lamp Roadmap”; on February 24, 2012, the Ministry of Industry and Information Technology released “Integrated Circuit Industry”. Two Five-year Development Plan.

The National Development and Reform Commission once made it clear that in 2012 the Chinese government will spend 40 billion yuan on procurement of LED street lamps, providing 30% financial subsidies for LED street lighting users.

Local governments have also devoted great enthusiasm to the LED industry. They have implemented significant preferential policies for the LED industry in many aspects such as land, taxation, technology development, talent introduction, and equipment purchase. Take Guangdong as an example. During the 12th Five-Year Plan period, the entire strategic emerging industry invested a total of 10 billion yuan, which is 20 billion yuan each year. In the first year of the 12th five-year plan, it invested 4.5 billion yuan to support the LED industry, which fully demonstrated the Guangdong Province’s LED industry's attention. The Guangdong Province also stated that starting from March 1 this year, all lighting projects and new planned development areas in Guangdong Province that are financed by the government will use LEDs in public lighting.

With the stimulation of favorable policies, industry industries have also generated tremendous growth potential. People from the National Development and Reform Commission pointed out that during the 12th Five-Year Plan period, the LED industry is expected to achieve a quadrupling target. By the end of 2015, China's LED lighting penetration rate will reach 20%. In the industry, it is generally more optimistic. It is estimated that by 2015, the penetration rate of outdoor LED lighting in China will reach 60% to 80%, the penetration rate of indoor commercial LED lighting will reach 25% to 30%, and the penetration rate of indoor home LED lighting will be about 5%. At 10%, the overall penetration rate of LED lighting in the Chinese market will reach or exceed 20%. The rapid growth of the LED lighting market is estimated to continue from 2012 to 2015.

The temptation of favorable policies and the potential for huge growth potential in the future, coupled with the low barriers to entry for LED lighting industry, many small-scale, small workshop companies can easily enter, so there have been various sources of funds have gathered LED lighting upsurge .

"Because of the great potential of the LED lighting industry, lighting, photovoltaic products, 3C, and hardware are all being squeezed into the LED industry, thinking that this is a profit blue ocean. Even real estate companies have come to ask me. Is it not very profitable to make LED?” said Wang Junhua, deputy general manager of Guangdong Juco Lighting Co., Ltd., told China Business Daily.

However, LED lighting industry is a technology and capital-intensive industry, and only the funds are not enough. Contrasting with the "heat" of downstream investment in LED lighting, it is the "cold" situation in the upstream of LED lighting products.

It is understood that there are currently more than 2,000 companies engaged in the research, development, production and application of LED technology and products in Shenzhen, and most of them belong to the LED packaging and application technology field. There are 97 high-tech companies engaged in LED, accounting for 3.5% of the 2835 high-tech enterprises in Shenzhen. Among the Shenzhen-related companies, there is only one chip production, and none of the semi-conductor materials and phosphor production companies that are crucial to product production.

“Upstream companies account for 70% of the profits of the industry chain, and the midstream and downstream account for the remaining 30% of total profits.” Qiu Huanguo, senior manager of QINGSUNG Optoelectronics International Business Department, told China Business Daily. The LED chip is the core material of LED lighting. At present, most of the LED lighting products in China are mainly imported from the United States, Japan, and Taiwan, while Chinese companies mainly gather in the middle and lower reaches of the packaging and applications, most of the Chinese LED. Profits remain in the upper reaches of the product's foreign countries, while the domestic industry's low-end industries are not expected to have high profits. Coupled with overheated investment, the price war will no doubt be avoided.

Some companies who only want to “get a pen” have entered the industry, but they are simply speculating on the concept of energy conservation, but they cannot really save energy. Faced with the pressure of fierce market competition and rising raw material costs, these companies are willing to sacrifice quality. The inspection report of the Guangdong Provincial Bureau of Quality Supervision showed that in 2010, the qualified rate of LED lighting products in Guangdong Province was only 47%. Although this figure has increased by 26 percentage points in 2011, it is only 73.2%. "The 73.2% pass rate is still low compared with foreign countries," said Zhang Yanfei, deputy director of the Guangdong Provincial Bureau of Quality Supervision.

"Now the domestic LED lighting field is basically in a chaotic state of disorderly competition, and it is becoming increasingly fierce." Wuxi Changjiang, chairman of Shenzhen NVC Lighting Co., Ltd., told reporters.

Technology is a breakthrough Many people believe that LED production capacity is excessive, but Wang Dianmo, honorary president of Shenzhen Semiconductor Lighting Industry Development Promotion Association, did not think so.

“At this stage, it is still far from discussing the overcapacity of the LED lighting industry. At the initial stage of the development of any emerging industry, there will be cases of investment. When 250 to 300 companies were launched in the country to produce televisions, there are now only 6 markets. The hand will play a role." Wang Diantang told the China Business Daily reporter.

Wang Dianbiao believes that the LED industry's prospects are obvious to all and cannot use short-term market performance to judge whether the production capacity is surplus. “There is indeed a certain inconsistency in the upper and middle reaches of the LED industry in Guangdong Province and even the entire country, but in terms of overall demand, there is no excess capacity. Compared to the fear of overcapacity, it is more important to pay attention to the quality improvement and independent innovation of the LED industry. The ability to improve, and how to significantly reduce costs.There is no reliable quality, no independent intellectual property rights, no cost reduction, LED lighting industry is difficult to achieve a breakthrough."

It is understood that more than half of the technologies and patents in the global LED field are occupied by a few large companies in developed countries such as the United States, Japan, and Germany. Japan Nichia Chemical, Japan Toyota Synthetic, the United States Cree Corporation, Philips Europe, Osram Europe, etc. applied for a number of patents to maintain their competitive advantages and maintain their market share, covering almost the entire industry chain including raw materials, equipment, packaging, and applications. .

Obviously, the monopoly of industrial giants' patents has hindered the development of Chinese LED companies. According to the "12th Five-Year Development Plan for Integrated Circuit Industry" (hereinafter referred to as "Planning"), China's integrated circuit high-end chip imports totaled 157 billion U.S. dollars for the first time in seven consecutive years. Therefore, the "planning" put forward: Focusing on the national strategy and the needs of the whole machine, we must guide and support the development of common key technologies based on the advantaged units.

"LEDs are emerging high-tech industries. Government support and the company's money can't solve all problems. The lack of core technicians has become the bottleneck for the development of all companies. Only the technology is advanced and the best is the best." Deputy General Manager, Research Center for Basic Electronics Industry Zhang Xiaokang also told the China Business Daily reporter. At present, the LED industry is facing the situation that the upstream lacks experienced core technicians, and the technicians in this area have to cultivate for more than three years. In the past year or two, digging enough skilled technicians and experienced front line operators will be one of the key factors for the company to survive until the next round of rapid growth.

In fact, LED companies are also realizing the importance of technology. Many companies went to the United States, Russia and other countries to learn from. At present, domestic technology, patented LED companies have also applied for patents.

For the broken LED industry problem, Qinshang Photoelectric responsible person believes that it is necessary to set industry standards to regulate. Up to now, LED has gone through 20 years of development in China, but China still lacks national standards that are recognized by the industry. The lack of standards causes the phenomenon of “bad money to drive out good money” in the LED lighting market, because low-end products can easily get projects through low prices, and companies that make high-end LED lighting products will “lose losses” for the development of an industry. It is very unfavorable to say.

"To formulate standards, and is a high starting point standard, the overall level of the industry can only go up." Related to the responsible person said.