Analyze the reason why the LED collapses

Taiwan's Chili Optoelectronics is said to have a good performance in the industry, but also has two rich fathers of Innolux and Chi Mei Industrial Co., Ltd. as shareholders, but now it is reported that the business is out of business, which will once again push the topic of LED business failure to the cusp. Some people say that the collapse of the LED industry in mainland China is like an epidemic. Now that the disease has spread to Taiwan... Whether you say it is a guess or a legend, the closure is a fact. What are the reasons for these companies from strong and healthy to death?

Keli Optoelectronics was once an outstanding student in Taiwan's LED industry, but it also had two rich fathers, Chuang Chuang and Chi Mei Industrial, as shareholders, but now it was reported that the company was out of business. The main reason is that the Mainland is supporting the LED industry with strong capital and high subsidy policies, allowing mainland practitioners to compete at a low price, and the mainland has also caused closures due to such excessive competition. This situation is now spreading to Taiwan. For the mainland LED SMEs, state subsidies and government procurement are basically out of reach. The “Matthew Effect” is vividly reflected in the state subsidy policy. Large enterprises use financial subsidies to “turn losses into profits” and even “squeak” and “cheat”, and SMEs often miss out. In the tide of popularity of LED outdoor lighting, public lighting government procurement orders are mostly listed companies, small companies are difficult to share.

Reason one:

"Bad goods" flood the market

Hsiung Kee, who had just closed down, was mainly engaged in low-end products in the ancient town. This kind of product was called “bad goods” in the industry. The feature was that the price was low and the quality was not guaranteed.

An industry insider in Foshan said that more than three blocks in Zhongshan can buy a bulb, and in some places this type of lamp may sell for tens or even hundreds of yuan. On the one hand to do low prices, on the other hand to make money, so that some companies in the quality of products to do things. The things that are used to doing things are not qualified. They cannot be sold, but in the fierce competition, you do not do others.

Earlier this year, the Guangdong Provincial Bureau of Quality Supervision announced the results of spot checks on 51 batches of LED street lights and light source controllers. Among them, 20 batches were unqualified and the rate of discovery of unqualified products was 39.2%. This also means that a large number of unqualified LED products are flooding the market.

Reason two:

Meager financing is too difficult

Excessive production capacity has triggered a vicious price war among companies, which has caused the price of downstream LED products companies to continue to decline, and profits have naturally been diluted. At present, the gross profit margin of the LED industry is only about 20%, while the net profit is less than 5%.

In addition to the shrinking profit margins, the financing issue has always been the "big mountain" that SMEs can hardly cross.

According to industry sources, there are widespread "consecutive bonds" in the LED industry. Many companies cooperate with suppliers and rely on credit to ensure the turnover of corporate funds. In accordance with the prevailing rules in the industry, many people choose to write to upstream raw material suppliers while allowing downstream customers to make payments to maintain long-term orders. In this chain of arrears of circulation, once the company's sales market is unstable or the profit space is declining, and the product quality cannot meet the customer's requirements, the arrears chain will break down.

The difficulty of financing SMEs is an indisputable fact. The increase in external costs has pushed up the demand for funds. In the case of monetary tightening, SMEs have limited access to credit resources and have low satisfaction of financing requirements. In addition to the lack of effective collateral for SMEs, the difficulty of loans has also increased. Even if the loan is owed, the interest on the loan rises and the guarantee cost is too high, which makes SMEs unable to afford it.

Reason three:

Overcapacity survival of the fittest

At present, the LED market is saturated, and the LED industry is eager for instant success, overcapacity, and vicious competition. Various enterprises are mixed, and everyone is adhering to it, even if it is at a loss. However, under such market conditions, the LED industry has re-emerged into the eye of capital. Xishan Coal, Furi Electronics, BYD and others have entered the LED.

The LED industry's enterprises are in a converse trend to expand production, and there are unrelated companies entering the LED industry. This will inevitably lead to further aggravation of excess production capacity and further deterioration of market competition. Excessive investment makes the LED industry oversupply, and many companies are in the lower middle and lower technical barriers. In the future, LED companies will face cruelty and survival of the fittest. Only a few companies will gradually grow, and more companies will face the fate of being eliminated.

From this perspective, blindly following the trend and expanding production capacity can not only make the company bigger, but it can be smaller and smaller until it is eliminated. Therefore, it cannot be done because of bigness.

In addition, most of the small and medium-sized enterprises in the entire industry are doing downstream LED lighting products, small factories workshops. Due to the relatively low technical requirements for terminal companies and the low barriers to entry, competition in this area is extremely fierce. In the future, market share will be increasingly concentrated on brands, channels, and innovative companies. The industry will face reshuffling, and there may be a large number of SMEs withdrawing from the competition.