Can the LED industry no longer use these methods to resist the economic downturn?

The downward pressure on the economy is increasing day by day, and everyone is anxious. As the "grandfather" of the entire economy, Premier Li Keqiang is most worried, but the basic thinking he has always adhered to has not wavered. He said in the Northeast that there are indeed problems with the economic structure of the Northeast. If Daqing and FAW "sneeze", Heilongjiang and Jilin will "cold"! But how to adjust this structure? We definitely cannot rely on the government to build a new industry, but we still need to stimulate the vitality of the market; we are determined to streamline administration, delegate power, combine delegation and regulation, break the constraints of systems and mechanisms, and truly loosen constraints for the development of enterprises and the people.

The situation of a listed company in the LED chip field that the author recently came into contact with can support Li Keqiang’s thinking. The company is under great pressure. The chairman said that firstly, a large chunk of gross profit is eaten up by interest, and secondly, annual depreciation costs more than 300 million. The company's average loan interest rate is 6%, which is very low compared with small and medium-sized enterprises. The depreciation policy is amortization over 20 years, which is not aggressive. But the chairman said that the loan interest rate would be better if it were lowered to 1% to 2%.

Why is it so difficult for leading companies? The chairman said that the main reason is that the entire industry has too many government subsidies, too many companies have entered the market, the production capacity is too large, and prices continue to fall.

LED lighting represents the next generation of lighting and meets green, low-carbon and energy-saving requirements. Therefore, starting in 2007, the government began to advocate the elimination of high-brightness and high-energy-consuming lamps. After the 2008 financial crisis, the "Opinions on the Development of the Semiconductor Lighting Energy-Saving Industry" was announced, proposing a series of industry development goals, specific to annual growth rate, product market share, share in functional lighting, liquid crystal backlight, landscape decoration, etc. Semiconductor lighting is also included in the strategic emerging industries. In 2012, relevant departments made it clear that they would spend 40 billion yuan on the procurement of LED street lights and provide 30% financial subsidies to LED street light users. In order to promote the consumption of energy-saving home appliances and other products, energy-saving lamps and LEDs have also received more than 2 billion yuan in subsidies. At the local level, the enthusiasm is even higher. In just a few years, a large number of metal-organic chemical vapor deposition equipment (MOCVD) have been installed. They were mainly purchased with government subsidies, but they basically cannot reach economic scale.

Statistics show that from 2009 to 2011, there were an average of more than 20 new LED chip projects added every year in China, and at the most, there were more than 80 chip companies. Some places have provided financial subsidies of hundreds of millions or even two to three billion yuan, and they all have their place. Two years ago, if China's MOCVD equipment was fully operational, it could meet 80% of the world's LED lighting needs.

In March 2013, Shenzhen abolished the "Notice on Issuing the Shenzhen LED Industry Development Plan (2009-2015)", marking the government's awareness of the shortcomings of blind and rapid development of the LED industry. Currently, there are only more than 20 LED chip companies that can produce normally, and there may only be a few left in the future.

There are always more solutions than difficulties. However, the method of distorting resource allocation and using the government to replace market decision-making must never be used again.