Overcapacity wire and cable manufacturing industry is facing challenges (1)

[Introduction: Since 2010, China's cable manufacturing industry has reversed the downturn in 2009 as the economy of the electrical industry has improved, showing a significant growth trend. According to the statistics of the China Electrical Equipment Industry Association, from January to April, the electrical industry achieved an industrial sales value of 971.735 billion yuan, an increase of 32.10% year-on-year, and a total import and export volume of 34.465 billion US dollars, a year-on-year increase of 31.76%. Profits also showed an upward trend; The total profit of the cable manufacturing industry reached 3.51986 billion yuan, a year-on-year increase of 58.39%. According to the forecast of experts, the demand for the cable market in China will continue to grow. 】

Although the market demand situation is promising, China's current wire and cable manufacturing industry is facing a severe test. The capacity of China's cable manufacturing industry was already oversupply, but it is still undergoing frenzied expansion. As a result, excess production capacity has led to increased vicious competition in the market.

Some people have a metaphorical analogy. Electricity is the blood of the economy, and wires and cables are blood vessels and nerves that carry blood. In recent years, China's cable manufacturing industry has been developing at a rapid rate, increasing by 15% to 20% each year, and maintaining the world’s top output value of 700 billion yuan. However, due to the impact of the international financial crisis in 2009, China's cable manufacturing industry slowed down. Although the pace of development has slowed down, a large number of advanced equipment and technologies introduced in recent years have, after years of digestion and absorption, formed a complete manufacturing chain. The enormous production capacity of China's cable manufacturing industry is still making the world look impressive. According to market survey data, at present, there are more than 4,000 cable companies in China, and the power cables and electrical equipment provided by them account for 20% of the global share, ranking the first in the world.

Since 2010, China's cable manufacturing industry has reversed the sluggish state of 2009 as the entire electrician economy has improved, showing a significant growth trend. According to the statistics of the China Electrical Equipment Industry Association, from January to April, the electrical industry achieved an industrial sales value of 971.735 billion yuan, an increase of 32.10% year-on-year, and a total import and export volume of 34.465 billion US dollars, a year-on-year increase of 31.76%. Profits also showed an upward trend; The total profit of the cable manufacturing industry reached 3.51986 billion yuan, a year-on-year increase of 58.39%. According to the forecast of experts, the demand for the cable market in China will continue to grow. First, with the rapid development of new energy industries, wind power, nuclear power and other clean energy have ushered in an unprecedented construction cycle. The market size of special cables in China is 40 billion to 50 billion yuan per year, accounting for 20% of the total domestic cable market. 30%, while the current high-end cables required by China are almost all dependent on imports. The second is that the copper twisted pair cable used in communications will continue to be the protagonist of the broadband subscriber line in the next 10 years. It is expected that the second climax of telephone cable sales will occur in a few years, and the annual sales volume may recover to 70 million to 85 million pairs of kilometers, indicating a steady increase. Third, although the domestic supply of electronic wire rods is in excess of demand in macro terms, it cannot meet the needs of the color TV industry in terms of variety, specifications and special performance. For example, ultra-fine enameled wire, there are more than 10 domestic manufacturers, but due to various reasons, about one-third still need to rely on imports. Self-adhesive enameled wire, China's varieties and performance and the international advanced level there is a big gap, some high-performance and high heat-resistant grades of the product still need to import, these products need to be realized in the domestic. Fourth, the power cable accounts for 25% of the total output value of the cable. The annual output value is nearly 40 billion yuan, which is a big market. Moreover, the market capacity of power cables is still growing at an annual growth rate of 8% to 9%.

According to the national energy plan, the construction and renovation of the new round of large power grids and urban and rural power grids will in turn bring tremendous business opportunities to the cable manufacturing industry. During the “Eleventh Five-Year Plan” period, the State Grid Corporation’s total investment reached 850 billion yuan, and the country’s total investment exceeded 1 trillion yuan. Experts predict that by 2020, China's UHV and cross-regional grid transmission capacity will be 210 million kW, of which 800 kV DC power grid is about 56 million kW, and another about 150 million kW by the AC grid. By 2020, the market demand for cables will reach 406 billion yuan.

The disorderly expansion of production capacity "Although the market demand is still heating up, the deep-seated problems in China's cable manufacturing industry are already very prominent. It is imperative for the integration of resources and transformation to be upgraded." Secretary of the Electric Wire and Cable Branch of China National Electrical Equipment Industry Association, Mr. Chen Kun According to the report, the rapid development of the high-voltage transmission grid and new energy industry has triggered more and more investors to invest in cable manufacturing, resulting in the disorderly expansion of production capacity from conventional cables to high-voltage cables and special cables. It is understood that in recent years, domestic companies have launched more than 60 high-voltage VCV cable production lines (the cumulative number of other countries is only more than 20). Why is there an orderly expansion of the production capacity of high-voltage cables and special cables in China's already overcapacity cable manufacturing industry? Chen Kun believes that the technical content of conventional cables is low, there is basically no market access threshold, the production capacity of the entire industry has far exceeded the market demand, and the market competition continues to show a state of enthusiasm. China's high-voltage power transmission and power grids and new energy industries have developed rapidly in recent years. Cable manufacturing resources are bound to tilt toward high-voltage cables and new energy cables. “The over-expansion of cable capacity is very serious.” Chen Kun expressed concern that since last year, governments at all levels have driven the development of new products or the development of high-end technology products under the policy of “expanding domestic demand and ensuring growth”. Investing huge amounts of money, building new factories, and purchasing production lines and equipment from abroad are frequently several hundred million yuan, more than one billion yuan, or even several billion yuan, forming a new round of investment boom. “Regardless of whether the nature of the enterprise is state-owned or private, The majority of the funds invested comes from the loans of the National Bank. At present, these investments make the cable manufacturing industry, which has already been over-developed and has a serious overcapacity, a problem that is aggravated by problems.

Take high-voltage cross-linked cable vertical production line (VCV) as an example. Domestically, 32 productions have already been put into production by the end of 2008 (only one of which is domestically produced). There are 28 products that will be put into operation soon after being purchased. A total of 60 pieces will be produced. With the completion of these production lines, domestic VCV production lines that originally had only 40% equipment utilization were left idle. At the same time, due to excess production capacity, the vicious competition such as cutting corners, shoddy goods, low-price competition sales, and even counterfeiting is even more serious. This kind of blind investment that ignores actual conditions not only wastes a lot of money, but also jeopardizes the healthy and orderly development of the industry. According to relevant department statistics, 95% of the 4,000 cable companies in the country are small and medium-sized enterprises. Only 300 companies have annual sales exceeding 100 million yuan, and only 10 enterprises account for more than 1 billion yuan. In China's cable manufacturing industry with a total output value of nearly 700 billion yuan, industrial concentration is low and economies of scale are insufficient.

According to experts, in addition to serious overcapacity, the structural contradictions in China's cable manufacturing industry are very prominent. While Chinese companies are keen to invest in high-voltage cable production lines, they are unable to solve the problem of localization of ultra-clean cable materials. There are only a handful of manufacturers who can produce high-voltage cable accessories. Research institutions for high-voltage cable systems are even rarer. Especially in the cable industry chain, there are few companies with high value-added products involved, and high-end products such as aerospace, submarine, nuclear power, electronic cables, heat tracing cables, and automotive wiring harnesses are mainly provided by foreign-funded enterprises or overseas companies. Take the nuclear power station cable as an example. According to relevant department statistics, by the end of 2010, the installed capacity of nuclear power in China will reach 20 million kilowatts, and the cable for nuclear power plants will provide a market space of 10 billion yuan. The demand for wind power cables will also reach 2 billion yuan, and the demand will double every year. As the cables used in nuclear power plants are very strict in terms of technical performance such as halogen-free, low-smoke, and low-toxicity, at present, our country can only produce cables for peripheral uses of nuclear islands, and all other cables are dependent on imports. Wind power cables also have special technical performance requirements, and high-end products still need to be imported.

Transnational companies have entered the Chinese market in large numbers and further promoted the vicious competition in China's cable manufacturing industry. As early as a few years ago, multinational corporations such as Corning of USA, Fujikura of Japan, Alcatel of France, Pirelli of Italy, and Samsung of South Korea began to study the Chinese wire and cable market. They all agreed that China is the most promising potential for fiber optic communications and high-voltage power cables. Market. In recent years, multinational corporations have established fiber optic cable, wire and cable production bases in China through wholly-owned or joint ventures, and major international telecommunication equipment manufacturers have entered the Chinese market and realized localized production. Corning has built three factories in Corning, Chengdu, Corning, and Shanghai Optical Fiber. Japan’s Sumitomo built Shenzhen Optical Fiber and Cable Factory, and Japan’s Furukawa and Fujikura successively built factories in China. South Korea's LS company also entered the Chinese market, with LS cable, LS color TV, LS machinery and many other entities, the asset size reached 5.7 billion US dollars, also set up an automotive cable production plant in Wuxi, Jiangsu. “The involvement of foreign wire and cable giants has added even more uncertainty and uncertainty to China’s uncertain cable manufacturing industry. However, we should also see its positive side.” Chen Kun believes that foreign cable companies Entering the Chinese market and forming the internationalization of the Chinese market, foreign wire and cable companies bring in capital and technology, as well as advanced management concepts and management culture, which are conducive to learning and drawing lessons from domestic cable companies and establishing an international perspective. To implement an internationalization strategy, "If domestic cable companies want to survive, they must increase their awareness of the crisis and improve their competitiveness."

Deeply troubled by copper prices

Affected by the high prices of raw materials such as copper, aluminum and plastics, especially the price of copper, the cable manufacturing industry has experienced unprecedented cost pressures. “China has entered the period of heavy chemical industry. With the advent of high-cost era, the rising price of production factors has become an inevitable trend. It is unrealistic to expect raw material prices to return to their original levels. However, through the improvement of market mechanisms, The government's macro-control and necessary interventions to curb irrational price-raising factors such as market monopolistic behavior and market speculation are still very necessary.” Liu Gangli, chairman of Hebei Xingtai Cable Co., Ltd. believes that this is important for promoting the coordinated and healthy economic development. The conditions are also the expected development environment for the cable manufacturing industry. It is understood that copper, aluminum, and plastics account for more than 80% of the cost of cables. The significant increase in the prices of these raw materials has resulted in a substantial increase in product costs. However, due to the serious overcapacity of cable capacity, the market competition has become increasingly fierce, and cable sales prices have increased. It is difficult to improve reasonably. In particular, in the low-end and mid-end cable product market with relatively low technology added value, the situation of price reduction and price competition is quite common. At present, the cruel market competition makes it difficult for some cable companies to survive. Industry insiders believe that the underlying cause of low-price competition for products is blind investment, overcapacity, and oversupply. On the one hand, due to the low investment threshold, a large number of companies have flooded into the country, causing cable manufacturers to “overkill”. On the other hand, due to the low “threshold”, some “shop-style enterprises” that do not have quality control and testing methods can be removed from them and become sources of counterfeiting, shoddy work, cutting corners, and shoddy products, and by lowering sales prices, etc. Means disrupt market order and aggravate disorderly competition in the industry.

Recently, when a cable house reporter interviewed some cable companies, the company unanimously stated: "The price of copper is too high to bear." Although the market demand is large, orders for millions of cables also occupy a certain proportion, but customers cannot Accepting the practice of increasing the cable price due to the rise in copper prices. Cable companies are very troublesome. Most of the results are: "The price of this order may not be adjusted upwards, but if there is another cable demand, it must be used by me." The outside world claimed that this was a unique “overlord clause” in the cable industry. In the interview, cable companies hope that through the call of the reporter, the largest user of the cable, the grid company, will change the bidding method and increase the contract price of the cable that has been signed so that they can overcome the difficulties.

Cable manufacturing seeks self-salvation

At present, in the cable manufacturing industry, large companies and small businesses are facing a severe test of survival. What is the road to self-salvage?

Bigger by competing

“Healthy and orderly market environment is a strong plea for all Chinese cable companies.” Lin Yida, deputy secretary-general of the former China Electrical Equipment Industry Association, told the reporter that the cable industry association has been advocating industry self-regulation to avoid vicious competition, although companies have expressed their position. Self-discipline, but the fact is that corporate self-regulation is difficult to honor, and the current situation of excessive market competition has not changed at all. The industry hopes to prevent vicious competition through government's administrative intervention, and it is also difficult to be effective. “The market problem can only be solved by the market. Only through full competition, the survival of the fittest can make workshop companies, ultra-low-price bidding companies, companies that do not pay attention to product quality, companies that do not pay attention to cost management, and the timing of investment is misplaced. Enterprises that do not pay attention to after-sales service are gradually being eliminated by the market, thus purifying the market order and making China's cable manufacturing industry continue to develop healthily."

"The highest realm of self-redemption is competition and cooperation, and competition is superior to competition." Lin Yida believes that in today's market environment, domestic cable companies must survive through competition and cooperation in order to become bigger and stronger. No matter whether they are local companies or between local companies and foreign-funded enterprises, they must compete with each other and they must cooperate with each other in various forms. The domestic cable production capacity has been severely surplus. Through the integration of stock resources, the time and cost of development can be greatly saved, and the scale can be quickly formed. At the same time, product development time can be shortened and talents and technologies can be obtained.

Improve core competitiveness

All along, China's cable manufacturing industry has given the outside world the impression that its technology content is not high. More than 80% of the competition is concentrated on ordinary cable products. As a result, the market suffers from excess production capacity of low-end cables and shortage of high-end cable products. The reason is that the core competitiveness of Chinese cable companies is not strong.

What is core competence?

“The core competitiveness of a company is the most competitive resource that can be controlled by the company itself.” Cao Xiaotong, a professor at Xi’an Jiaotong University, believes that different phases and different market environments of the company should create different core competitiveness.

For example, in a relatively free-competitive market environment, the competitiveness of enterprises when they are just starting is the ability to quickly respond to the market and the quality of goods and services; during the stage of steady performance, the most important thing is quality competitiveness; at the stage of the development and expansion of enterprises, In addition to ensuring quality competitive advantage, we must also regard innovation ability as the core competitiveness; if we continue to develop and be a century-long enterprise, we must regard corporate cultural influence as the company's core competitiveness.

“Under a severe market environment, improving core competitiveness, identifying the pulse of industrial transformation, and increasing the added value of cable products will undoubtedly occupy an advantageous position in the market competition.” Jiang Huajun, general manager of Far East Group Composite Technology Co., Ltd. introduced Far East promotes the core competitiveness of enterprises by taking the path of high technology development.

In the Far East, the first is the establishment of a corporate cable research institute and a national postdoctoral research station, and increased cooperation with Tsinghua University and Shanghai Cable Research Institute to form a multi-level technological innovation system and successively developed special cables for nuclear power plants. With new products such as carbon fiber composite wires, the company’s core competitiveness is constantly increasing. The second is to intensify the introduction of talents, from a number of well-known universities and research institutes at home and abroad to hire a group of senior technology, management personnel to join; at the same time under the strength of training enterprise technology backbone.

"A company with a strong capital can attract talents with high salaries and improve its technological competitiveness. Enterprises that are short of money must make a fuss about low costs. Large enterprises can increase their ability to innovate, innovation can be used as their core competitiveness, and small businesses must follow the example of imitation. , use flexibility to build the core competitiveness." Xiaoyan Cao thinks.