The LED industry has entered a severe winter period. How should small and medium-sized enterprises respond?

Some time ago, news of the collapse of two LED small and medium-sized enterprises, Guangneng Technology and Zhongxiang Innovation, quickly spread within the industry. Although it was not two blockbusters, it also caused quite a stir in the entire LED industry.

According to industry insiders, the direct cause of the collapse of these two companies is the break in the capital chain, and the specific root causes of the collapse of the two companies are different. The problems of light energy technology are as follows: the company positions its products in the mid-to-low-end market and gets involved in price wars in the industry. Product quality is not guaranteed, post-service services cannot keep up, and the company cannot get profitable orders; Zhongxiang Innovation is due to the company's leap-forward development and blind expansion, which leads to the collapse of the company's capital chain.

In fact, the bankruptcy of these two companies is not an isolated case. Here, the author has collected and sorted out the "bankruptcy" incidents that have occurred in the industry in recent years for the readers.

Calm down and analyze the reasons behind it. It is not difficult to find that the direct reason for the collapse of LED companies is nothing more than the break of the capital chain, and there are three fundamental reasons: first, the vicious price war in the industry; second, the company's own positioning is inaccurate; third, the company's capital turnover failure.

1. The industry’s vicious price war

The current overcapacity in China’s LED display industry is something I believe every LED practitioner can relate to. my country's LED display industry has experienced more than 10 years of rapid development, especially after the investment "blowout" in recent years, and has gone out of the previous "horse racing" development stage. Nowadays, my country's LED display industry has a relatively serious structural surplus, that is, a surplus of mid- to low-end homogeneous products, and there are surpluses in epitaxy, chips, packaging, downstream applications and other fields. In addition to the saturation of the domestic market, the international market is not optimistic either. The current global economic downturn has put many domestic LED companies that mainly rely on exports to make profits into trouble.

In today's LED market, especially the mid-to-low-end market, price wars are prevalent. Some LED companies have forgotten about concepts such as brand and quality. They have raised the price banner and are very busy seizing the "cake" of the end market. Even many listed companies are participating. Many LED small and medium-sized enterprises are forced to respond in order to survive, making competition in the low-end field more intense. As the industry reshuffle continues, the pressure on small and medium-sized enterprises to survive has increased sharply.

The price of products is falling again and again. At the same time, the profits of enterprises have been repeatedly compressed, and the quality of products is not guaranteed. This vicious competition method, which hurts the enemy by one thousand and damages oneself by eight hundred, is highly praised by the entire industry. Many companies go bankrupt not because they cannot repay their suppliers, but because they cannot get profitable orders. What's more, there are problems with product quality and the company cannot get paid, leading to bankruptcy. No wonder people in the industry lament that this is the best of times and the worst of times.

2. The company’s own positioning

For any company, the accuracy of its own positioning will be directly related to the company’s long-term development. Compared with other established industries, the LED industry is an emerging industry and a rising star. Due to the immature development of the industry, most companies are in their immature stage, and it is inevitable that their positioning will be inaccurate.

The first is market positioning. LED display companies should combine their own actual conditions, find their own positioning in the market, and strive to become the "leader" in this market segment and become an indispensable part of the industry. For example, some companies are "hot" in outdoor media, some companies are developing traffic guidance screens, some companies are leaning towards digital signage, and some companies want to take the road of creative screens, etc. In the future, LED companies will definitely have a customized development, but the direction of each company is different. On the contrary, if some companies blindly expand regardless of their own positioning and try to become bigger and stronger, they will eventually break their capital chain due to tight cash flow.

In addition, in the context of overcapacity in the industry, many companies have no choice but to position their products in the mid- to low-end market due to their limited strength and imperfect funds, technology, and innovation. Many companies do not invest much time and energy in product research and development, technological improvement and innovation, but instead blindly follow the path of copycats and imitations. The prevalence of copycats in the industry has led to serious homogeneity of products in the market. In order to survive, some companies will do whatever it takes to engage in price wars and use low prices to survive and develop. I believe that with the integration and reshuffling of the industry, companies with no distinctive products and no core competitiveness will inevitably be eliminated.

The second is brand positioning. In any industry, brand building is a long and difficult process. Enterprises must not only ensure the quality of their products and establish their reputation in the market, but also invest a lot of manpower and material resources in brand marketing. In recent years, due to the saturation of the domestic market, there has been a situation where there are too many people but too little food. Many companies have shouted the slogan of "survive first, develop later", so they have no time to consider the construction of corporate brands. In addition, from the perspective of the overall development pattern of the industry, some large listed companies have established their own brands and laid the basic pattern of the domestic market. If small and medium-sized enterprises want to develop their own brands, it is tantamount to surviving in the cracks, and the difficulty can be imagined. The lack of brand makes it difficult for companies to establish the reputation of their products in the market, and customer loyalty is even more difficult to talk about.

3. Fund turnover failure

The author believes that LED companies lack funds, which leads to corporate capital turnover failure and is also an important reason for the collapse of some companies. Through investigation, it was found that the entire LED industry generally lacks funds, even listed companies are no exception. This involves the so-called "triangular debt" issue in the industry. According to the payment practices of the LED industry: downstream customers are generally required to pay a 30% deposit first, then pay part of the payment after the display screen leaves the factory, and then settle the balance after passing the final acceptance inspection; suppliers generally give complete machine assembly and manufacturing companies a 60 to 90-day account period. The LED industry is a project-intensive industry. After a company undertakes a project, the initial investment is very huge. For listed companies, the financing channels are wider and the problems are relatively easy to solve. However, it is a very big test for small and medium-sized enterprises. Under the premise of original tight funds, once there is a problem with the project, the balance cannot be recovered, and the company's capital chain is very likely to collapse.

For many small and medium-sized enterprises, in addition to "triangular debt", they also need to face financing problems. It is an indisputable fact that small and medium-sized enterprises have difficulty in financing. The rise in external costs has promoted an increase in capital demand. Under the situation of tight money, small and medium-sized enterprises have limited access to credit resources, and their financing needs are low. Coupled with the lack of effective collateral for small and medium-sized enterprises, the difficulty of obtaining loans has also increased. Even if the loan is obtained, the rising loan interest and guarantee fees will make it unaffordable for small and medium-sized enterprises. With no way to obtain legal financing, some small and medium-sized enterprises have no choice but to turn to the private market, that is, financing intermediaries such as guarantee companies and underground banks. Although these channels can provide loans, the interest rates are astonishingly high and there are large risks.

Financing is difficult, and government subsidy resources are mostly tilted towards large LED companies, making small and medium-sized LED companies even more strapped for funds. In the LED industry, when a company has financial problems, it is most likely to be attacked by suppliers. If the supplier's credit period is extended, the company's poor financial situation will be spread to the industry, and several suppliers will demand accounts from the company at the same time. This will be like a bank run. You are being asked for accounts while being out of stock. When all suppliers refuse to supply raw materials, the capital chain will be fragile at the first touch, and the company will soon collapse.

To address these problems, how can we prescribe a prescription for small and medium-sized enterprises? The author believes that we can start from at least three aspects.

1. Find a niche in a segmented field and make a rational market choice

Positioning yourself well is the first step for enterprise development. In the face of fierce competition in the industry, some companies have begun to become irrational. They have not considered their actual situation, failed to measure their own strength, failed to recognize themselves, blindly expanded, followed the path of leapfrog development, and dreamed of becoming the king of every market segment. They wanted to get a share of the pie in every field. This was an unwise approach. After all, the resources of an enterprise are limited. Each enterprise should find out its own advantages, find its own position in the market segment based on its own situation, develop rationally, become bigger and stronger rationally, and follow the path of differentiation and specialization. Only then can it develop long-term in the fierce market competition.

In addition to finding the right position in market segments, companies should also carefully consider the development of international markets. Faced with the saturated domestic market, some companies should boldly enter the international market if they already have strong comprehensive strength, relying on the international market to find new profit growth points for the company.

2. Hard training of internal strength is the key and all aspects must be taken into consideration

Faced with the unfavorable situation of industry overcapacity, market saturation, and serious product homogeneity, companies must not blindly participate in price wars, but must be down-to-earth and continue to accumulate in order to go long term. The author believes that small and medium-sized enterprises can start from these aspects.

First, focus on brand building. Brand building is a long-term process and is by no means accomplished overnight. Brand is an intangible asset. Brand is the soul of an enterprise's development. If an enterprise wants to develop in the long run, it must build its own brand. First of all, we must adhere to the principle of quality first. Only good products can impress customers, win their trust, and establish solid customer relationships. Good products can establish a good reputation for the company in the industry market and lay a solid foundation for the company's later brand building. Secondly, with the rapid development of the Internet, the channels for brand building have become diversified. Enterprises must seize the opportunity, increase investment, make full use of the current Internet platform to promote the brand, and build their own brand.

Second, innovation is the key. The first is technological innovation. Enterprises must increase capital investment, increase research and development of new products, increase product added value, make technological breakthroughs and innovations, form their own characteristics, and create independent core competitiveness. The second is model innovation. Enterprises must break out of the old thinking model and the constraints of the traditional order-based production model, use Internet thinking to explore new production profit models, develop new markets, and find profit growth points. Finally, there is market innovation. With the continuous advancement of LED display technology and the continuous improvement of people's living standards, I believe that the application scope of LED displays will be further broadened. In the future, LED displays will definitely develop in the two directions of intelligence and creativity. This requires enterprises to have innovative thinking to explore emerging markets in order to lead the trend and always be at the forefront of the industry.

Third, do a good job in channel construction. On the one hand, we should do a good job in building the dealer system and handle the partnership with suppliers; on the other hand, we should grasp the current good situation of the Internet. The Internet is the future development trend and a new entry point for corporate channel construction. Enterprises should combine "Internet +" with the LED industry to plan layouts and continuously create new products, new businesses and new models.

Fourth, improve the financial situation. First of all, enterprises should expand their own financing channels and introduce more capital flows. It is also a wise move for some companies to choose to go public or list on the New Third Board, enter the capital market, and use capital from the financial market for capital operations; secondly, enterprises should establish corresponding risk control mechanisms and improve risk defense capabilities. For financing, you must go through formal channels and don’t fall into the financing trap.

3. Follow the trend to survive and seize opportunities to develop.

As the saying goes, those who understand the current affairs are heroes. Enterprises should follow the development trend of the entire industry and should not fight alone. Only by integrating its own development with the development of the entire industry and relying on the development of the industry to pursue its own development can an enterprise continue in the long term.

Following the trend does not mean blindly following the trend, but selectively combining the current industry development trends to plan the company's own development. For example, I believe that small-pitch LED TVs will have an impact on traditional LCD TVs in the future as the technology continues to improve. Therefore, some LCD TV manufacturers are also actively planning to enter the LED market, hoping to keep up with this trend and achieve a win-win situation. Take mergers and acquisitions, for example. When it comes to mergers and acquisitions, it seems to be an unspeakable thing. In fact, it is quite normal in any industry. For companies, the reasons for including companies in merger and acquisition plans are actually different. Some companies are really unsustainable, some want to find another way out and enter other fields, and some companies are purely to earn capital. No matter what the situation is, I believe that as long as it can promote the development of the industry, it is advisable.

China's LED industry has just started, and it is inevitable to encounter some problems. It will take some time for an industry to mature. With the development of the industry, the industry will also face restructuring and reshuffle. The concentration of the industry will become higher and higher. No one can predict how many small and medium-sized enterprises will survive. I believe that China's LED industry will get better and better.