In 2008, a RMB 4 trillion (US$586 billion) economic stimulus plan and financial compensation for LED industry by Chinese government helped LED industry evolve rapidly. According to the statistics, over half of LED enterprise’s profits come from government compensation. Lured by the government incentives, LED enterprises just swarmed upon new projects and rushed headlong into LED production blindly. Giants in other industries like BYD, Tsinghua Tongfang, Rainbow Group, Changhong, China Electronics Technology Group, Zhongcai Group got involved with these areas too.
For Guangdong province alone, over 20 companies were listed. Kingsun Optoelectronic, Honglitronic entered into capital market, and the total market capitalization was over RMB 20 billion. The aggregate investment for provincial LED industry bases in Huizhou, Dongguan, Jiangmen, Nanhai, Zencheng and etc. was over 50 billion Chinese yuan.
The Red Ocean condition in Chinese LED market accelerates and Philips opts out
Yet as the globalization of LED market, the competition grows fiercely. Many LED lighting companies seek to transform, or scale up for lower price or split off LED business for new profiting market. With Chinese housing market entering into ice age, RMB currency value rising, and labor costing increasing, the LED market embraced with a wave of small business failures, and the government financial compensation plan for LED enterprises suffered a serious defeat.
On May 31st, Philips Lighting Factory in Shenzhen–Philips Consumer Luminaires Manufacturing (Shenzhen) Co., Ltd. issued announcement about deciding to dissolve the company in advance, caused uproar in the industry. The announcement said that in recent years the company has experienced various difficulties such as the economy continuous downward, costs rise, business continuous deteriorates, despite the various measures taken, the company still failed to reverse the situation. As the world’s leading lighting brand–Philips Lighting, much attention has been paid to each step of the closure of the factory in Shenzhen, this has also sparked concern about China’s manufacturing industry.
In fact, the trace of Philips Lighting movements can be found in recent years, Philips Lighting have shut down many factories all over the world, including the United States, Canada, Britain and so on, and also announced it will close a factory in Thailand this year.
Would we regain market confidence for LED industry?
From earning reports of 33 LED related companies in 2015, 16 companies achieved growth both in revenue and net incomes, 10 declined on revenue and net incomes. Meanwhile, Kingsun Optoelectronic and Minda Group’s revenue down despite net profit increases. For Zhouming Technology, Lianjian optoelectronics, Liyade, Honglitronic, Changfang Lighting, Wanrun Technology, Changfang Lighting……Revenue increases obviously.
The statistic show that exports for lighting industry in 2014 is US$ 45.3 billion, with year-on-year growth of 9%. And LED exports reaches US$ 10.8 billion, with a 20% year-on-year increase.
That means LED industry still has a huge market potential, and the prospect is deem as promising by giants of different industries.
On the one hand, the enterprising released good business results; on the other hand, companies failed to pay debts, factory closed. What a striking contrast! So what on earth happens to LED industry? Do hidden peril of the LED industry or the idea and insight of the company leaders decide the different fate of companies? Would the LED industry in 2016 infuse confidence into market?
