In the context of economic downturn, the lighting and LED industry has 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.
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 new 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.
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.
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, LED chip company Dehao Runda increased its stake in NVC Lighting by 6.86%, ultimately holding a total of 27.10% stake in LED lighting company 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% of Founder's equity 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.
It is understood that the net profit of Zhongjing Electronics continued to decline in 2011, 2012, and 2013, while Founder's net profit in 2012 and 2013 was not only higher than that of Zhongjing Electronics, but also showed an upward trend. The net profit in 2013 even doubled compared to 2012. 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.
ANNA