LED industry: Don’t pretend to be fat, meager profits are the norm

Eat or be eaten? This is a difficult choice

In recent days, several lighting companies in Foshan have been thrust into the limelight. On the 25th, Fosan Lighting and Dehao Runda announced the suspension of trading at the same time, and will plan for mergers and acquisitions in the next time.

There is speculation whether Dehao Runda is preparing to take the lead in acquiring Osram's lighting business and acquire Fo Zhao; there is also speculation that Fo Zhao will jointly participate in the bidding for Osram's lighting business with Bain Capital.

Currently, there are rumors of rumors of bidding for Osram's lighting business, including Foshan Lighting, NVC Lighting (Dehao Runda), Sunshine Lighting and other listed companies. In addition, Feile Audio, which has previously publicly expressed its interest in Osram's lighting business and plans to issue a non-binding acquisition offer, and Unilumin Technology, which has previously announced its intention to acquire a subsidiary of a well-known company in the global energy efficiency management field, have also been speculated by many industry insiders to be Osram. The answer to the mystery is about to be revealed. I don’t know which company will win the final bid.

Meager profits are the norm, and the future is dominated by large-scale enterprises

As competition intensifies, I believe that starting from 2014, we will continue to hear a voice, that is, business is becoming more and more difficult to do, profits are getting lower and lower, etc. Maybe it was because the industry was so prosperous in the past few years that we were spoiled, so now that profits have just begun to decline, everyone is complaining. In fact, in a truly mature industry, small profits are the norm. A company's profits are not earned through huge profits, but through the accumulation of many small profits, which is the so-called benefit of scale.

Judging from various signs in the current industry, the industry is moving step by step towards the era of meager profits. An obvious trend in the semi-annual reports of many big-name companies is the decline in profits, and there is a downward trend from upstream to downstream applications. During the Guangya Exhibition in the middle of the year, big-name domestic manufacturers such as Opple, Fo Zhao, and Mulinsen publicly launched a price war, bringing the price war in the general lighting field to a new stage. Previous price wars were more of a small fight between small companies, and the intervention of these large manufacturers shows that the price war has spread across the entire industry, and has truly entered the era of scale and capital.

Don’t be “inflated” and mainland enterprises need to cultivate their core competitiveness

Relying on the mainland's vast market hinterland and continuous industrial integration, the news that the output value of some mainland-funded enterprises has surpassed that of major international manufacturers is no longer new. Coupled with continuous overseas mergers and acquisitions, the "body size" of mainland-funded LED companies has generally become larger. However, as “quantity” increases, has “quality” improved?

Many listed companies have experienced explosive growth in market value by relying on a series of capital operations and large-scale operations, but they still remain in the low-end repetitive competition, stuck in the quagmire of low prices, and the overall profit margin is not ideal. However, it does not have an advantage in the competition in the high-end field. Its brand premium ability is limited, and it is still not competitive compared with major international manufacturers.

Mainland companies cannot be "inflated". Compared with the overall increase in quantity, the "quality" improvement in products and services is more important. Relying on the increase in the market value of the brand is the most competitive improvement.

Why do LED executives frequently resign?

Since the second half of this year, the resignation of senior executives of LED listed companies has become more and more frequent. Entering August, as the mid-term report cards of listed companies are released intensively, the number of resignations of senior executives of listed companies is on the rise. According to incomplete statistics, as of the end of August, 18 senior executives of listed LED companies had resigned during the year, a surge of twice that of 2014, involving leading companies such as Nationstar Optoelectronics, Sanan Optoelectronics, and Qinshang Optoelectronics.

The frequent changes in the leadership of the LED industry seems to have become the norm in the industry. Listed companies mostly mention the reasons for leaving their jobs as "personal reasons" or "work reasons", making it difficult to distinguish whether they are true or not. However, some market analysts believe that resignations during the interim report disclosure period are mostly related to the company's poor performance or reduction of holdings for cash.

It is worth mentioning that the LED market is changing day by day, the LED industry is constantly integrating mergers and acquisitions, and more and more companies are beginning to adjust their development strategies and transform. The adjustment of corporate development strategies will inevitably lead to corresponding adjustments in human resources strategic planning.

What cannot be ignored is the frequent resignation of senior executives in the LED industry, which further reflects the urgent need for talents by enterprises. How to attract and retain outstanding talents has become a problem faced by enterprises today.

The era of great expansion of Mulinsen is coming

MuLinsen recently announced its annual report for the first half of 2015. According to the annual report, its operating income in the first half of the year reached 2 billion yuan, an increase of 11.17% over last year. Among them, the revenue of LED packaging business, which is the main business, reached 1.621 billion yuan. In the first half of this year, the LED lighting application field that we focused on developing was more obvious, with LED application and other operating income reaching 353 million yuan, a year-on-year increase of 20.20%. As the leader in the domestic packaging industry, Mulinsen's revenue in the first half of the year continued to be far behind its peers, but its profitability dropped slightly from the same period last year, with net profit of 232 million yuan, a year-on-year decrease of 7.58%. The decline was mainly due to the profit loss caused by the upgrade of some LED lighting products in the second quarter.

Mu Linsen has dominated the LED packaging industry in the name of price butcher in recent years, gradually rising to become the domestic packaging leader. In last year's revenue ranking of Chinese LED packaging market manufacturers, it even defeated Cree and entered the top three in the mainland Chinese market. After the successful listing in February this year, Mulinsen used the power of capital to carry out comprehensive layout, established subsidiaries, joint stock companies, private placements, and made every effort to improve sales channels, and delivered excellent results in the "High School Entrance Examination". Some time ago, it raised a huge amount of 2.3 billion to increase its LED business to achieve scale advantages, further consolidate its leading position in the LED packaging business, and accelerate the extension of downstream LED application lighting fields to improve the layout of the LED industry chain. Mulinsen's rapid expansion continues.