GLII: Prospects for the LED Lighting Industry (VII) - Analysis of the Seven Reasons for the Enterprise Level of the LED Industry

[Text|High-tech LED Industry Research Institute (GLII)] In 2014, the number of roads running in China's LED lighting industry gradually increased, and the scale of enterprises running on the road continued to record high. With the arrival of the peak year-end settlement, the end of the year is a high-risk period for companies to run.

At 10 o'clock on the evening of December 6, 2014, Gaogong LED reporter received news from the industry that Liu Juyong, the boss of Juliang Optoelectronics, lost the link and took away the supplier's payment of more than 200 million yuan. Juliang Optoelectronics' main products include LED lighting modules and LED lighting applications. It is understood that Juliang Optoelectronics was formerly known as Shenzhen Century Starlight Electronics Co., Ltd., and currently has five subsidiaries: Juliang Optoelectronics, Aikesi Lighting, Shilun Lighting, Baojing Optoelectronics and Guojing Optoelectronics.

Ju Liang was ranked among the best in the LED packaging industry two years ago. Its collapse was mainly related to the fact that its boss’s goal was too large and the pace was too fast. The high-tech LED industry research institute believes that the capital chain break is the number one killer of enterprises in the LED lighting industry. Most of the business owners who run the road have been working hard in the LED industry or the lighting industry for many years. They have also been brilliant, and they have devoted all their efforts in their careers. Therefore, most of the people who run the road are not conspiring to deliberately squander private escaping, but an irrational practice in which enterprises are eliminated in the market competition. This practice also greatly harms the interests of partners. There are several reasons for the LED lighting companies to run from a business perspective.

1. The account cannot be recovered in time and the capital chain is broken. This is the most serious problem in the LED industry chain in the past two years. With the intensification of competition, the end-users of the industrial chain owe the downstream, the downstream owing to the middle reaches, and the upstream and middle reaches of the upstream are also becoming more and more serious.

Second, excessive expansion led to a break in the capital chain. Although the LED lighting industry is still in a period of rapid development, in the past two years, industry technology has developed rapidly, and product prices have fallen by more than 60%. Most of the corporate net profit rates have fallen below 10%. At the same time, if the company does not rapidly expand its production scale, it will be greatly restricted in terms of order acquisition, material procurement, and consolidation and promotion of market competitive advantages. In this case, many companies have to expand production quickly. Corporate finance is mainly through bank financing and arrears with the money of the industrial chain suppliers. However, it is often difficult for a company's profits to make up for cash expenditures in a timely manner. After accumulating a certain amount of money, there will be a situation where it is unable to make ends meet.

Third, the product layout is too large, resulting in a broken capital chain. Including the mid-stream package is heavily invested in downstream applications, the downstream application display is used for lighting, and the production bases are deployed in multiple places in the country at the same time. Such enterprises are prone to break the capital chain when bank funds need to be returned or invested more than income.

Fourth, the channel layout investment is too large, leading to a broken capital chain. Enterprise layout terminal distribution channels require large-scale capital investment in sales meetings, product promotion, sales network construction, terminal channel subsidies, personnel salaries, and inventory. The channel layout often takes 2-3 years or more to produce stable scale sales. The excessive investment in the operation of the company's maintenance channels is also an important reason for the capital chain break.

5. The sales loss caused the capital chain to break. The price of enterprise products is lower than the cost, which is rare in the current market. Because the company basically considers the most basic profit when pricing the products, the industry price has been continuously decreasing rapidly, and most enterprises are also strict in inventory control. . Most of the losses in product sales are for promotion, product promotion, customer resources, slow sales, lower prices, lower inventory, higher sales costs, or rob customers at lower prices.

Sixth, the price can not keep up with customer demand. The upgrading of LED lighting products is very fast, with the rapid advancement of technology and equipment. If the enterprise does not have certain R&D capability or industrial supply chain control capability, it is easy to lose the competitive advantage. The same price of the same performance product can be profitable in the A enterprise and the loss in the B enterprise. The non-technical enterprise often becomes the main body of the failure.

Seven, some entrepreneurs are not willing to suddenly run without money, or choose to run away from reality. In 2014, not only the LED lighting industry, but also the number and scale of running in the entire manufacturing industry and even the financial industry in China reached a record high. In the LED lighting industry, the risk in the next few years will be higher than in 2014.

Zhang Hongbiao, research director of the High-tech LED Industry Research Institute, said that the collapse of industrial enterprises is an inevitable process. For the surviving enterprises, they can gain more market share, while the running is an abnormal form of performance. At present, although the proportion of LED lighting closures and running roads is relatively small, it shows a rising trend every year. Once more than 10 billion yuan enterprises are closed down in one year, it will become a large-scale collapse of upstream enterprises in the industrial chain. Tipping point. Enterprises often have several major ex ante features before they close down and run: 1) selling products at a lower price than in the market; 2) arrears with various excuses, and the time is getting longer; 3) suddenly large-scale Reason for purchase; 4) More than two suppliers feel that the risk of business failure is getting bigger and bigger.

Entrepreneurial running not only damages the interests of suppliers and partners, but also damages the credit of industry peers, which will make the whole industry more difficult in bank loans and other financing. As the industry matures, the requirements for corporate financial risk control capabilities are also increasing. In fact, most suppliers are still willing to help enterprises tide over the difficulties. Most of the leading companies will encounter one or several times of life and death in the process of growth, and they will spend a lot of time in the sky. This is also a test of entrepreneurs' strategic transformation and upgrading in the face of life and death. The moment of ability and inner strength.

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