In the context of a slowdown in economic growth, the lighting and LED industries have entered the traditional sales off-season as expected. Recently, both manufacturers and distributors have complained to reporters, saying that business is difficult and life is difficult.
The reporter learned that the situation within the industry has been changing recently, with some lighting companies losing money, some executives resigning, and some even running away in debt. Faced with industry difficulties, advantaged companies have stepped up their acquisitions to keep warm, and the industry has ushered in a wave of mergers and acquisitions.
In addition, local enterprises in Guangdong have taken a different approach and are preparing to move to markets outside the province and draw their battle lines to the northwest. Industry insiders believe that relying on the original industrial advantages and northern location advantages will help local lighting companies develop markets and overcome difficulties.
Price war leads to market chaos
Recently, many lighting companies or dealers have reported to reporters that business has been slow this year and life has been difficult. A local dealer revealed that business was barely enough in April and May this year, but in June it was bleak, with not even 10,000 yuan available. The dealer said that there are still two full months left before the peak season of Gold, Nine and Silver Ten, and the following July and August will be the most difficult days.
Industry insiders told reporters that many companies enjoyed a "good start to the year" last year, but this year many companies got off to a bad start. Sales have been hindered for several months, resulting in increased inventory, and many companies are complaining. The person said the situation is expected to be even more severe in the second half of this year.
It is understood that the current lighting industry is anxious both internally and externally. Many companies have fallen into losses and are struggling and suffering; some companies are facing the resignation of senior executives, such as Qinshang Optoelectronics; some companies are in debt and running away; and some companies have been merged and acquired, such as Pinshang Lighting, which was acquired by Jiawei Shares.
The above-mentioned industry insiders revealed that overcapacity in the industry has triggered vicious price competition among enterprises, causing product prices of downstream enterprises to continue to decline and profit margins to be severely compressed. The person said that the current gross profit margin of the LED industry is only about 20%, while the net profit is less than 5%.
It is understood that the direct consequence of vicious price competition among enterprises is that the prices of products on the market are low but the quality is not guaranteed. A reporter recently visited the market and found that a 3W LED bulb can be purchased in the wholesale market for as cheap as more than 3 yuan, while similar products produced by brand companies are sold for tens of yuan each, showing a huge price disparity. Some manufacturers blindly emphasize low prices, resulting in uneven product quality and confusing prices on the market.
LED industry: corporate mergers and acquisitions to stay warm
With the development of the LED industry, many companies in other fields have also begun to enter the LED industry.
Relevant industry insiders pointed out that excessive investment has caused oversupply in the industry. In the future, a small number of companies with R&D and production capabilities will develop and grow, while midstream and downstream companies with low technical barriers will face the fate of being eliminated.
At present, there have been many mergers and acquisitions integration cases within the industry. In 2013, Furi Electronics acquired 92.08% of the equity of Marui Optoelectronics. In May 2014, Dehao Runda increased its stake in NVC Lighting by 6.86%, ultimately holding a total of 27.10% stake in NVC Lighting. Afterwards, Jiawei Co., Ltd. announced that it would acquire 100% of Pinshang Lighting’s equity for 123 million yuan, and Changfang Lighting announced that it would acquire 60% of Kangmingsheng’s equity for 528 million yuan.
In addition, Zhongjing Electronics also officially entered the LED lighting field by acquiring 100% equity of Founder for 286 million yuan. After Konka withdrew from the LED display field, OCT Group spent 248 million yuan to acquire 100% of the equity of Konka Video, a subsidiary of Konka.
Industry insiders believe that the acquisition of Zhongjing Electronics is to save the company's performance dilemma. After the acquisition is successful, at least Zhongjing Electronics' performance will no longer decline in the next few years.
According to analysis by industry insiders, the scope of industrial integration will definitely expand in 2014, and mergers and acquisitions in the industry may become a major trend in the future.
Local enterprises: "Going out" to develop the northwest market
It is understood that Guzhen Town, Zhongshan City, Guangdong Province has always been the largest lighting production base in China. Its greatest advantage lies in its complete industrial chain, all kinds of accessories, power supplies, and various assembly one-stop services. The fierce competition between industries is fully reflected here, so it is called the "battleground concentration" of lighting companies in the industry.
Some people in the industry pointed out that Zhongshan lighting companies generally have problems such as unclear product positioning and serious product homogeneity. Under the pressure of a series of problems, "survive first, then develop" has become an important issue that many companies are currently actively seeking breakthroughs.
A relevant person in charge of Zhongshan Yinghuang Lighting recently revealed to reporters that the company's sales situation has been poor since the end of last year. In order to improve the current situation, the company is preparing to open up a new market in Inner Mongolia by joining forces with advantageous companies in Inner Mongolia and taking advantage of local location advantages to expand the market to the west or northwest.
It is understood that Yinghuang Lighting is one of the largest lighting companies in Guzhen Town, Zhongshan City. The National International Lighting City jointly built by it and the National Group, the largest trade and circulation group in Inner Mongolia, was launched on the 3rd and is scheduled to be officially put into operation in June 2015.
According to the above-mentioned person in charge, 26 local companies have signed contracts with the National State-owned Enterprise Lighting City and are preparing to enter the northwest market. In this regard, industry insiders pointed out that local companies are seeking the northern market, which reflects from the side that lighting companies and even the entire industry are currently facing severe sales pressure and market tests.
ANNA