LED packaging plant grab food lighting market

Perhaps it is fancy to the LED lighting market with broad prospects. The application of packaging plants to enter the downstream lighting industry has become a “trend”. It is understandable to explore new profit growth points, but the potential risk of looting the market with downstream customers cannot be ignored. "We only sell LED devices in the Chinese market, and we will not easily sell lighting products in the Chinese market at least in the next few years." Cree, a maker of lighting devices, has started selling LED lighting products in the US market. And Cree China insiders believe that this move "will still affect the device market in China, a bit to offend customers". This is because some of Cree's Chinese customers will also express such concerns when they cooperate. "I bought your device and it will end up competing with you in the US market."

In the Chinese market, there are people who use packaging and spoiler lighting in the downstream, and those who stick to the position also have it. Among the companies whose LED packaging business is listed as their main business, the main downstream LED lighting businesses are Guoxing Optoelectronics, Hongli Optoelectronics, Wanrun Technology, and rectangular lighting. It is clearly stated that the focus on packaging is not focused on downstream lighting applications. Photoelectric and Ruifeng Optoelectronics.

So, what exactly are you focusing on packaging and expanding the lighting market?

Qiang Qiang grab lighting application market

The effectiveness depends on who competes with how to compete

From the 2013 annual report, National Star Optoelectronics achieved operating revenue of 1.142 billion yuan, an increase of 20.51% year-on-year; net profit attributable to shareholders of listed companies was 113 million yuan, an increase of 187.23% over the same period of last year. National Star's main products are epitaxial chips, LED devices, LED components, lighting applications and others. Among them, the country's 2013 optoelectronic chip business revenue was 2,890,600 yuan, LED device revenue was 711 million yuan, LED components revenue was 194 million yuan, lighting applications and other business income was 229 million yuan. In addition, the government subsidies received by China Star Optronics in 2013 totaled 164,433,700 yuan, including 40,134,400 yuan of government subsidies for the current period.

In addition, some packaging plants that have entered the lighting industry have also achieved impressive results. In 2013, the sales revenue of LED lighting products in 2013 was RMB 120 million with a profit of RMB 52,739,900. In 2013, LED lighting application products with rectangular lighting sources had a revenue of RMB 159 million and a profit of RMB 5,100,000; Hongli Optoelectronics, a leader in white light components In 2013, revenue was 736 million yuan, an increase of 38.79% year-on-year; net profit was 58.8799 million yuan, an increase of 24.56% year-on-year.

However, what kind of crisis is there behind the growth of net profit? Take China Star Optoelectronics as an example. Behind the increase of 187.23%, the epitaxial chip project is in deficit. The lighting application business still needs to save money, and the main packaging business has the danger of being overtaken by peers.

Grasping brand and shop channels has become one of the means by which these packaging factories attack downstream lighting applications, and it has also burned a lot of real money. In 2013, the sales cost of National Star Optoelectronics increased by 19.56% year-on-year. It was just a brand and channel construction project. Guoxing Solar has invested RMB 56,389,900 in total; Wanrun Technology's sales expense in 2013 was RMB 3,807,979,000, an increase of 62.27% year-on-year; Lighting sales in 2013 amounted to RMB 52.17 million, an increase of 84.80% year-on-year, mainly due to the increase in the company's brand building investment.

National Star Photonics started downstream LED lighting in 2006 and began to spread channels in 2012. As of the end of 2013, Guoxing Optoelectronics has held more than 10 promotion conferences in Zhejiang, Hebei, Hunan, Anhui, Jiangxi, Shandong, and Guangdong. Shaanxi, Hubei, Henan, Sichuan, and Yunnan have successively established operational centers, and the total number of dealers across the country has also grown to more than 1,000. As for the brand and channel construction projects, the company has invested RMB 56,389,900 in total. National Star Optoelectronics believes that the channel will become a hot spot for all companies to compete and the brand battle will become even more intense. This means that China Star Optoelectronics still needs continuous investment in brand and channel construction projects.

It is undeniable that in the face of a fierce competitive environment, the competitiveness of the brand and the advantages and disadvantages of the channels are directly related to the market expansion of lighting application products. In 2014, National Star Optoelectronics will shift its focus from the promotion of investment promotion nationwide to maintaining existing dealers in brand and channel construction, providing dealers with good quality and cheap products, and gradually highlighting the country’s stars. Photoelectric vertical integration successfully integrated quality advantages and price advantages.

In the same way, the main business of packaging is also the main distributor channel. Mulinsen is also occupying the market share of lighting products. In February, the dealers’ conference received a large lighting bill of more than 1.4 billion yuan. It is understood that in addition to the intensive cultivation of channels in the Chinese market this year, Mulinsen Lighting has established a subsidiary in North America, the world's largest lighting market, and is determined to create "dual engines" for development.

In order to consolidate and expand the market, the company has continued to implement channel distribution, increased channel investment and efforts, sales costs increased year-on-year, brand integration, provision for a relatively large amount of inventory depreciation, and the company's initiative to lower prices and other strategies. Caused a drop in product gross profit.

Wanrun Investment has set up a subsidiary company—Jinwanrun (Beijing) Lighting Technology Co., Ltd., which is responsible for the development, construction and maintenance of domestic marketing channels, and explores the mid-to-high end market for domestic commercial lighting and outdoor lighting. At the end of 2013, Jin Wanrun had a team of about 40 people and set up offices or stations in nine regions including Shanghai, Wuhan, Chengdu, Shenzhen, and Guangzhou.

Different from the channels of distributors who have come directly to the end market, Hongli Opto has placed more emphasis on the engineering channels in the Chinese mainland market.

Hongli Optoelectronics Lighting's application business is mainly led by its three wholly-owned subsidiaries: Laidiya Lighting mainly focuses on commercial indoor lighting, and exports are mostly domestic. The domestic market mainly uses engineering channels to develop the market; Foda Signal mainly makes automotive lighting and brake lights. , Turn lights, auxiliary automotive lighting products, etc., export-oriented; Heavy Ying Gongyuan mainly through the EMC contract energy management approach, assume the LED lighting project or LED lighting transformation management business.

According to Deng Shoutie, deputy general manager of Hongli Optoelectronics, there is no conflict between device and lighting application business. “The key lies in the market positioning of lighting manufacturers, whether there are advantages in cost, how to compete with them, and how to compete.”

Is it safe to focus on packaging that does not involve downstream lighting to keep all eggs in the same basket?

Clearly stated that it does not involve downstream lighting applications, such as Jufei Optoelectronics and Ruifeng Optoelectronics.

Yin Jinghuang, the director of the company, said that in recent years, Jufei Photovoltaic will not extend downstream, but will continue to adhere to the concept of “doing specialization” and focus on the familiar packaging field.

Yin Jinghuang believes that at present, there is still sufficient growth in the packaging business alone, and to do downstream lighting requires the accumulation of resources, technologies, and markets. Without extending into downstream lighting applications, the most critical concern is also that “if you do downstream lighting, you will have a competitive relationship with customers and negative impact on customers.”

Jufei Optoelectronics' operating revenue in 2013 was 753 million yuan, a year-on-year increase of 52.19%; net profit attributable to owners of the parent company was 131 million yuan, an increase of 43.06% year-on-year.

It also clearly indicated that Ruifeng Optoelectronics is not involved in downstream lighting applications. Following the concept of “being focused and professional”, Ruifeng Optoelectronics has consistently advocated focusing on the LED packaging field, and does not blindly expand upstream and downstream. According to Gong Weibin, chairman of Ruifeng Photoelectric, “put all eggs in a basket.”

Ruifeng Optoelectronics' operating revenue in 2013 was 682 million yuan, a year-on-year increase of 36.37%. The net profit attributable to the common shareholders of listed companies was 5,660,800 yuan, a year-on-year increase of 20.78%.

Whether it is "putting all the eggs in one basket" or "putting different eggs in different baskets" is a difficult and inconclusive decision. Looking at the practices of major international companies, Philips Lumileds, which operates the Philips Group, is responsible for the lighting business. Philips Lighting is responsible for the lighting business. While OSRAM operates the device business, it also sells lighting products. It seems that the conflict is not great, but the trade-offs are not all. Companies can learn it.