LED industry shuffle the game: financial crisis

"Financing," "liabilities," "leverage," ... Key words in these economic circles do not know when they are also rushing to the LED industry, which is even more ferocious. From Duo Duoli, Bolente Optoelectronics, Vision Optoelectronics, Haobo Optoelectronics, Jiahao Optoelectronics, Big Vision Optoelectronics, to Shenzhen Everlight, and Xiong Shan Xiongji... Those who are sensitive to the economy will find that these LED companies have closed down. A common feature - "debt management."

"Liabilities to operate", analogous to financing stocks, is actually a model of financing cattle production. The "primary" borrows money to push up the stock price. After the price starts, the financiers' collateral value increases, so that they can use more funds. Such as snowballs. As a result, the financing of Ushimata shares a large amount of funds in the transaction process, the stock price rally is fierce, and difficult to change soon after the formation of the trend.

However, the feast is not free, and the cost of adding leverage is very high risk. When the industry booms, debt expansion can earn pours; once the trend turns, the industry is in a sluggish state, and companies are “set” on high levels. "Snowball" may evolve into an "avalanche" - insolvency can only choose to recapitalize.

Cursed Price Curse

In recent years, due to the relatively high expected industry gross profit margin, low industry entry threshold and broad potential market, coupled with strong support from local governments, more and more companies and capital have competed to enter the LED industry.

“This type of “leaping” development has led to explosive growth of LED capacity in the short term, but it will also attract a lot of hot money inflows, especially in the market downturn, the speed of capital infiltration will be even more violent A brokerage who declined to be named told reporters .

"After experiencing rapid development of 'catalytic growth', the industry competition will become increasingly fierce, and the intensely competitive LED market will inevitably lead to frequent price wars, and the entire industry will fall into overcapacity, product prices, and small and micro enterprises The collapse of the development of the crisis." A number of industry sources said to the journalist.

An Infineon Optoelectronics executive told reporters that the current price war in LED terminal products is very common, many products are quoted once a month, an ordinary LED fluorescent lamp was 200 yuan two years ago, a year ago Is 150 yuan, half a year ago was 100 yuan, now only 80 yuan; another example is the outdoor full-color P16 display, the price in 2009 is 8,000 yuan to 10,000 yuan per square meter, and so far, the price has been reduced to each 3,000 yuan in square meters, it can be said that the price has declined in a straight line. Although the price decline is conducive to the promotion of LED products, at least in the short term, companies in the LED industry will face a certain degree of decline in product prices if their production costs do not drop at the same or faster rates. In the shock, they have to endure the pain caused by short-term adjustments.

"Blindly low prices to seize the market will cause the LED market's bad money to expel good money," the deformed form of development, many companies also agree with this, but some companies will still carry out irrational expansion, disorderly competition." An executive said.

After arrears of huge amounts of money from suppliers and breakage of the capital chain, companies can only be bankrupted and closed. From Duo Duoli, Bolente Optoelectronics, Vision Optoelectronics, Haobo Optoelectronics, Jiahao Optoelectronics, Big-Eye Optoelectronics, to Shenzhen Everlight, and Xiong Jiong, the collapse of these LED companies are all related to excessive debt, disorderly expansion, and blindness. Price seizing the market is inseparable.

Powerful leverage

Although the LED industry did not appear in the so-called "flooding tide", but the worsening of the environment, LED companies, especially the downstream SMEs difficult days.

“The gross profit margin of the LED display industry was more than 40% three or four years ago. With the intensification of competition and the sharp drop in export orders, the industry's profit margins have dropped sharply; now the gross profit of the LED display industry is generally maintained at 15- 20%, net profit is generally 7-8%, some entrepreneurs even pointed out that for the downstream part, due to low industry barriers, the proportion of profitable companies in Shenzhen LED lighting will not exceed 20%, 80% of companies in the LED lighting field do not make money. An insider complained to the reporter.

In the bankruptcy of small- and micro-LED enterprises, the decline of orders and profits of small and medium-sized LED companies, it is a few leading enterprises in the industry to seek listing financing under the stimulation of policy dividends.

Many executives said in an interview with the magazine that the listing of LED companies is conducive to the establishment of their own development base for the industry to recover through the vertical and horizontal expansion of the upstream and downstream industries. Moreover, in the current downturn of the LED industry, the gap between the scale and efficiency of enterprises will gradually enlarge, industry profits will be increasingly focused on the dominant companies with technology and market, and the speed of reshuffling and integration of the LED market will increase.

“As chip prices continue to decline as a result of capacity pressure, the profitability of the upstream and downstream chip industries of the LED industry has dropped significantly. In addition, the continuous increase in manpower, land and other costs for these years means that for large enterprises in the upper reaches of the LED industry, The gross profit margin has fallen sharply; for small and medium-sized enterprises, it means low profit and struggle with life and death,” an industry source revealed.

The "financial crisis" is dead.

Overheated investment, debt crisis in Europe, rising labor costs, increased flexibility of the RMB exchange rate, quality issues, and price/performance issues have affected various factors not only in domestic LED companies, but also in some of the well-known LED companies. The collapse of the company has also continuously pushed the LED industry to the cusp.

Big Eyes Optoelectronics, Jia Hao Optoelectronics, Hao Bo Optoelectronics, and Jia Hao Optoelectronics are all LED display companies with a scale of hundreds of millions. These enterprises have made too many stalls and the most serious problem of triangular debt. In the past few years, excessive competition in the field of LED display products and low product gross profit margins have always exposed the risk.

Zhongwei Optoelectronics told a reporter to the reporter that for the LED industry, it is necessary to be alert to the industry’s “triangular debt” that has been popular for many years. Once the capital chain breaks, many companies will fall into bankruptcy. The fall of star companies such as Vision Electronics will be alive. illustration.

Shenzhen Everlight has a scale of nearly 100 million, which is also a company that has over-utilized financial leverage. According to media reports, Shenzhen Everlight registered only 3 to 4 million of its capital, but its debt was over 10 million. From 2008 to 2012, the LED display industry has developed rapidly. Many companies have used financial leverage to maximize their market share in order to pursue market share. If the industry develops rapidly, the risk does not necessarily break out. However, once the growth of the industry slows down, the company's huge debt and triangular debt problems will be exposed and the company will be killed.

A person in charge of Lehman Optoelectronics told reporters: "In the past year, the LED industry has been affected by the reference effect of overcapacity in the photovoltaic industry, which has indeed led to a cautious phenomenon in the financing of LED companies by financial institutions. However, with the restructuring of the LED industry, With the survival of the fittest, financial institutions will continue to support and discard weakly in financing. The difficulty of financing some companies is related to their excessively aggressive development."

According to a senior official of Hangko Optoelectronics, the vicious competition in the LED industry will exacerbate the risk, drag companies into the quagmire of blind price wars, and induce risks to erupt in advance. The fall of many companies is due to the fact that their gross profit margin is too low, their products cannot be profitable, and that with no core technology, they are very weak in anti-risk capabilities in the case of large fluctuations in the industry.

A responsible person from General Technology Co., Ltd. told reporters: “The major reason for the company’s financial crisis is the problem of its own management. For example, the recycling of display screen money is slightly poorly controlled. Customers can easily pick faults and do not pay the purchase price. Control and management receive payment before shipping.If the company's own business is in good condition, the bank is willing to support the financing, and your operating conditions should make it clear to your cooperating bank. If the bank keeps watching your company grow up, the bank has confidence and financing. The problem is solved naturally."

Because the entry threshold for the industry is low and there are too many companies to enter, in order to be able to sell products, in the low-end lighting field, the vicious price war has intensified. Among these fallen companies, Hiroshi Nakayama is able to carry out the price war to the extreme. Hiroshi Nakayama's main low-cost low-cost LED lighting products, before the collapse of the LED bulb and other minimum has dropped to 1 yuan / watt or less. The price is not the lowest, but only lower. If you don't, you will sacrifice the quality of your products, cut corners, and live your life to quench your thirst.

"Feast" after a big change

When the lever is added, it is "happy", and when it is de-levered, it is "painful." At this point, the LED market is not much different from other fields.

In recent years, under the tightening monetary policy environment, due to the constraints of quota limits and loan-to-deposit ratio constraints, it has made it more difficult for domestic enterprises to obtain bank loans; in addition, LED industry is dominated by small and medium-sized enterprises, so the monetary tightening has had an impact on the LED industry. More extensive and in-depth. Rejecting loans, delaying lending, reducing quotas, and changing long-term loans to short-term loans have become the banks’ usual tricks for responding to LED companies. LED SMEs have to face financing difficulties.

It is understood that at present, LED small and micro enterprises mainly receive revolving funds through joint guarantees, guarantee companies, or small loan companies, but these methods of obtaining funds or entry thresholds are too high, or the verification qualifications are too stringent or the interest and risks are too high. It often makes small and micro enterprises out of sight but has to take the risk. At the same time, under the influence of slumping product prices and decline in orders, domestic small and medium-sized LED companies have basically lost their self-accumulated endogenous financing functions, and many LED companies are facing financial difficulties.

On the one hand, LED as an ordinary lighting product, the demand has not really broke out; on the other hand, the number of manufacturers and production capacity has grown explosively. Although the industry demand picked up in the first half of the year, the problem of overcapacity in the domestic LED industry has not been truly resolved, especially in areas such as LED chips, display applications, and low-end lighting applications. It can be foreseen that in a wave of painful industrial reshuffles, the few enterprises that can survive in all sectors of the industry chain will eventually survive.

In addition, in the face of shrinking orders from overseas markets, domestic LED companies hope to seek a development path of “export to domestic sales”; it should be said that LED manufacturing enterprises engaged in foreign trade and exports are in terms of quality and technology. Has a certain advantage. However, the foreign LED market has a relatively complete competition system. As long as the product quality is reliable, it does not mean that there is no better market. However, the domestic market is relatively immature. The key to product competitiveness comes from the low price of products, the public relations capability of the company and the personal relationship. Therefore, how to create new human resources and public relations capabilities, establish sales channels for entering supermarkets and specialized supporting markets, shift from a single outward-oriented development to making full use of domestic and foreign markets, and become a number of LED manufacturers engaged in foreign trade exports. The dilemma faced.

Thousands of sails compete and there are kings who must have cannon fodder. The industry reshuffled the curtain, and a major change in China's LED industry will also begin.