Is it a good way to identify market segments for small and medium-sized LED companies?

Around 2008, directly or indirectly affected by the Beijing Olympics, the LED display industry developed rapidly. A lot of capital poured in, creating a large number of professional LED display companies. However, as the industry market gradually becomes saturated, the situation of "more monks and less rice" has made the competition among LED display companies gradually become "white-hot". In recent years, affected by adverse factors such as downward pressure on the external macro economy and the slow recovery from the European and American economic crises, as well as increasingly prominent problems such as price wars, overcapacity, and disorderly competition within the industry, the LED display industry has entered a period of reshuffle and integration. In the process of industry reshuffle, some companies will inevitably withdraw from the market directly, and these small and medium-sized enterprises will be the first to bear the brunt.

According to the author’s visits to enterprises, in the face of a cold industry market, the operating conditions of small and medium-sized enterprises have shown a polarized situation. The performance of most companies has declined and their operations have been bleak; however, a small number of small and medium-sized enterprises have been less affected and their performance can still maintain a steady increase.

On the one hand, internal and external troubles are at stake

For a long time, small and medium-sized enterprises have been unable to compete with large enterprises in terms of product quality, technology and innovation, resulting in their lack of advantages in market competition. Especially in recent years, the industry has been in recession, market demand has cooled, and economic growth has slowed down. As a result, the profit margins of most small and medium-sized enterprises have been repeatedly compressed, and their survival has been in jeopardy.

In addition to the compression of profit margins, there is a widespread problem of "triangular debt" in the industry. Some LED small and medium-sized enterprises could not resist the temptation of the market and expanded significantly in the early stage. However, the existing market capacity failed to meet expectations. Without the backing and support of strong capital, excellent technology, advantageous brands and excellent operation and profit models, enterprises were struggling in the fierce competition. In fierce and disorderly competition, the capital chain will be overloaded. Once management is poor, triangular debt problems will ensue. Upstream, companies use continuously deferred bad checks to pay suppliers, and downstream dealers default on advance payments. Once this "flat... "If it is broken, the tragedy of the capital chain breaking will occur.

Financing difficulties have always been a "big mountain" that is difficult for small and medium-sized enterprises to climb. The financing channels of small and medium-sized enterprises are relatively narrow, their own financing capabilities and capital operation conditions may not be optimistic, and their ability to resist risks is relatively poor. The lack of funds makes the economic strength of small and medium-sized enterprises relatively weak, which to a certain extent restricts the rapid development of enterprises.

Not only that, some small and medium-sized enterprises also have many problems in their own management and positioning. Mainly reflected in: lack of perfect management system and single management model; management lacks long-term vision and only pursues short-term interests; lack of strategic planning and clear positioning, blind development regardless of its own actual situation; lack of personnel management and inability to retain outstanding talents, etc. Among the companies that went bankrupt due to their own management and positioning errors, a typical example is Zhongxiang Innovation.

In addition, some small and medium-sized enterprises have insufficient awareness of innovation, and most of their products are "copycats". They gather wherever they can make money without tailoring their products. Due to the lack of innovative awareness and technical capabilities, the homogeneity problem of products is serious, and peers can only compete through price wars. When a fierce price war breaks out, large companies rely on their strong financial advantages to play a combination of punches. Although they do not make money, they can still afford to lose money. However, small and medium-sized enterprises "cannot afford to hide or be hurt", so they will either have no choice but to follow the trend or collapse.

On the other hand, intensive farming is like a fish in water

Although most small and medium-sized enterprises face internal and external troubles and live miserable lives, there are some companies that are prospering, such as Wei Qiaoshun, Lei Ling Display, Lixiang Huike, Jinhuaguang, Radio and Lamp, etc.

Although the current industry is experiencing a cold spell, Ralink Display has not been greatly affected. The reason is that Ralink insists on taking a differentiated route. For example, at the Shanghai International LED Exhibition in September 2015, Ralink followed the trend of small spacing in the market and launched the rental small spacing product P1.9, which received an enthusiastic response from the industry. It’s no wonder that while other companies’ performance is declining, Ralink has been able to achieve steady growth.

In the first half of 2015, Lixiang Huike's creative display projects have made more than 100 million, and its project cases are all over the country, including the world's first retractable 2,600 square meters "invisible" giant LED display in Chongqing Sheraton International Business Building, a 2,344 m² LED display in Xinjiang Software Park Chuangzhi Building, a 1,321 m² LED display in Harbin Huahong International Center, etc.

As the spokesperson for three-in-one direct-plug displays, Jinhuaguang continues to innovate despite the popularity of surface-mounted displays. At the Shanghai Exhibition in September 2015, the Aurora Beam series launched was eye-catching, and the giant "diamond screen" held up in the radial beam was even more amazing.

From a layman to the leader of COB technology, Wei Qiaoshun has used facts to prove that COB has great potential. His outdoor COB products P3 and P4 are in the leading position in the world and are highly respected in the industry.

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Can developing market segments turn the crisis around?

From the examples listed above, it is not difficult to find that these small and medium-sized enterprises that are living a very prosperous life have a common characteristic. They all have their own technical characteristics in a certain market segment, so that "I have what others don't have, and I have excellence when others have it." Their market segments such as creative display screens, small spacing, COB, transparent screens, stage rentals, etc., do not conflict with the interests of large enterprises. Some companies have even been favored by large companies because of their advantages in market segments. Through this method, they have joined forces with listed companies and gone public indirectly, successfully putting themselves on the fast lane of capital and further broadening their financing channels and development prospects. Even in the current industry downturn, they can still live happily.

Today, the situation of small and medium-sized enterprises can be described as "ice and fire". In contrast, companies in the "mixed" market segment are obviously more popular. Does that mean that small and medium-sized enterprises' efforts to develop market segments are one of the ways out under the new situation? In this regard, industry insiders such as Xiang Jianyong, General Manager of Lianjian Optoelectronics, Cai San, Marketing Director of Unilumin Technology, and Tang Huijun, General Manager of Decai Optoelectronics Shenzhen Headquarters, all said that in the face of the new industry situation, it is worthy of recognition for small and medium-sized enterprises to develop into segmented markets on the basis of finding their own positioning.

It is undeniable that small and medium-sized enterprises do have great potential in developing market segments, and there are examples to follow. However, this does not necessarily apply to every enterprise, and specific situations require specific analysis. As Lin Shuchun, regional sales manager of Qianli Jucai in Guangdong Province, said, under the current circumstances, it is still difficult for small and medium-sized enterprises to develop market segments. After all, their customer base, production scale, and financial strength may not be that strong, and competition will be more brutal. In order to expand the market and attract customers, small and medium-sized enterprises should be stricter in quality control and not flood the market with low prices. To flood the market with low prices is to shoot yourself in the foot.

Author’s point of view:

Although small and medium-sized enterprises’ efforts to segment the market may be a way out, the author believes that it is also important for enterprises to improve their internal strength. No pain means no gain, and any company that thrives in a market segment must have put in its own efforts and hard work.

In the tide of industry development, small and medium-sized enterprises either have advantages in technology, market, customer relations, or price. All in all, don’t blindly follow big companies, but clarify your own positioning, strengthen your innovation capabilities, and work hard on product quality.

Small and medium-sized enterprises may wish to abandon "big but comprehensive" and insist on "small but beautiful". The product line should not be too long, find the market segments that suit them, focus and take a differentiated route. Especially in the face of opportunities such as the national “Belt and Road” strategy, the 13th Five-Year Plan, and supply-side reforms, small and medium-sized enterprises should adapt to the needs of economic development, always “keep an eye on” industrial policies, and seek transformation and upgrading.

In the next few years, industry resource integration, corporate mergers and acquisitions, reorganization, and expansion will lead to major adjustments in the LED display application industry structure. Passive or active mergers and acquisitions and integration will be the general trend, and competitive advantages will further tilt towards companies with technology, market, channel and scale advantages. The industry ecology of division of labor and cooperation between large enterprises and small and medium-sized enterprises is gradually taking shape: large enterprises will pay more and more attention to the development of conventional products, while small and medium-sized enterprises will further explore segmented markets and cultivate intensively.

As industry demand slumps, it will become increasingly difficult for small and medium-sized enterprises to "fight alone". In addition to focusing on market segments, teaming up to keep warm may also be a way out. 2016 has arrived. Are you ready to break through yourself or stick to your position?