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How to solve the LED business overcapacity problem?

Source:Internet Number of visits: Date:2016-05-05
In recent years, under the dual stimulation of market conditions and government subsidies, LED upstream business capacity expanding, increasingly competitive industry. Most enterprises to expand production scale to diluted cost of production in order to lower prices in exchange for market share, resulting in LED chip prices continued to fall. In particular, part of the LED manufacturers Fun time before the completion of continental subsidy policy ended machine purchase, the new machine so that mainland capacity to accelerate release, leading to global LED overcapacity situation worsened.
 
In mainland China LED enterprises generally overweight capacity expansion situation, Epistar, Samsung, CREE and other companies who have made a decision to selectively cut in order to ease the imbalance between supply and demand of the LED industry status quo and downward pressure on prices. Visible overcapacity has become a major obstacle to the development of LED industry. However, faced with the problem of excess production capacity, LED business is how to break the siege of it?
 
Merger integration, enhance competitiveness
 
Market downward competitive pressures brought about so many LED companies set off a wave of mergers and acquisitions integration. 2016, LED industry has undergone more than 10 cases from the merger integration, there are more than three average monthly M & A cases occurred, covering the LED industry chain.
 
LED industry merger integration can be better developed for small enterprises is undoubtedly "backed by a good shade tree," while for large companies it would have cost less to expand production capacity to maintain its market position in a way. LED companies to consolidate related businesses through vertical, to further expand the scale of enterprises, thus reducing procurement costs, create synergy, enhance their competitiveness and industry influence. As HC SemiTek bid 1.08 billion yuan to acquire 100% stake in Yunnan aquamarine science and technology to effectively integrate the aquamarine sapphire substrate production technology, and through the acquisition of Core King Optoelectronics, an epitaxial, chip, terminal applications, LED industry chain extension of the development .
 
Sound business system, adhere to encourage innovation
 
LED industry due to the low barriers to entry, in the past few years, large capital inflows, as well as an oversupply of each end of the chain showed a sharp decline in gross profit, many companies face losses or even eliminated. According to incomplete statistics, the disappearance of the market by 2015, LED enterprises reached 4000. 2016, LED industry supply and demand eased, overcapacity will become more apparent. We should give full play to the planning, policy, standards and constraints to guide the role of strict access conditions, to enhance access management, sound monitoring system and industry overcapacity situation early warning system, strengthen and improve industry management.
 
In the face of the entire industry overcapacity, lack of industry standards, product quality uneven situation and other issues, companies must ensure product quality, enhance product innovation. Currently the entire LED industry, many products are highly homogeneous, innovative applications to enterprise development Evergreen best choice.
 
The importance of innovation may be embodied in various aspects of the LED lighting industry. Channel innovation to reduce intermediate links, open up direct channels between businesses and consumers, and help alleviate the industry overcapacity; product innovation helps businesses out of the industry product homogeneity trap; innovation and enterprise management mode is able to help companies operating costs rising out of the dilemma; innovative financing sources, such as the current financial financing P2P network platform, it allows companies to get more financing channels. Adhere to encourage innovation, to encourage research and development, application of new technologies will help revitalize LED industry.
 
Increase research and development, from manufacturing to create
 
In the case of gross margins continued to be squeezed in the market to gain a competitive advantage through continuous price cuts are not a permanent solution. In order to cope with price competition, chip companies through the wafer is cut into small chips to more diluted costs. But with the reduction in chip size, in order to achieve the same light power must be increased injection current, improving the luminous power density, which the LED performance put forward higher requirements.
 
With one hand, to increase the power density, LED luminous efficiency is declining, which requires the use of superior performance when LED epitaxial structure to offset the decline in luminous efficiency. On the other hand, high power density LED luminous efficiency decline also means that produce more heat, which the LED chip heat dissipation and higher reliability requirements. If companies simply try to reduce the chip size without complemented by matching epitaxy and chip design and development, not only will lose the competitiveness of their products, the situation would exist overpower work product, resulting in a potential security risk.
 
In the context of the industry reshuffle, LED industry "rush" began to enter from the previous "rational", it has become an important means of technology research and development enterprise transformation. Therefore, we should encourage enterprises to increase investment in research and development, increasing the content of the product technology to enhance value-added products.
 
For example, Lattice Power (Jiangxi) Co., Ltd. energy-saving lighting and crystal hand in Nanchang University to complete the "high-efficiency silicon substrate GaN-based blue light emitting diode project" won the State Technological Invention Award; Kingsun Tsinghua University join hands to complete the "three-dimensional behavior of light regulation of the free surface of the optical semiconductor lighting Construction and application" project won the 2014 State technological invention Award, which reflects the importance of enterprise technology research and development, increase research and development, to build autonomous innovation value chain system of intellectual property rights, innovation and R & D capabilities to fight the core competitiveness of enterprises, in order to achieve the "Made in China" to "Created in China."
 
Take the high-end product line, market segmentation force
 
Face price war intensified LED lighting "Red Sea" market, LED enterprises should upgrade their skills through dedicated high-end segment in the field of "Blue Ocean" in development. Such as automotive lighting, smart phones with LED-FLASH flash, ultraviolet LED, lighting with special plant wavelength LED lights, and other high-end applications. For example, science and technology mergers and acquisitions harmony Jason electrical, force in the field of deep UV LED; and HC SemiTek also have a small pitch layout display chip, flip-chip high-margin market segments, and achieved good results.
 
In recent years, price wars so that profits plummeted, the huge market demand for general lighting applications that bring high revenue situation is really just an illusion. For this reason, the production of LED products not only to meet the needs of existing market segments, but also to meet future demand from emerging markets do technical reserves, ready to respond to changes in the market, providing customers with a non-homogeneous products. Products to the market, to be able to take the long-term.
 
Strengthen patent protection, the expansion of overseas markets
 
Chinese government's "along the way" strategy for domestic LED upstream enterprises "going out" to provide a favorable policy environment. At present, LED replacement market becoming saturated, overcapacity LED chips, LED enterprises generally small and medium business difficulties, India, Southeast Asia and Russia and other emerging markets entered the LED lighting alternative demand period. The implementation of "all the way along the" strategy will drive along the country's infrastructure, LED lighting products will then have a broad market.
 
However, most of the current core LED patents has been dominated by giant international lighting, domestic LED lighting enterprises "going out" is not only high patent licensing fees to be paid to the control of the core patent international giants, they will face back at any time before the patent litigation. To this end, domestic enterprises need to have awareness of intellectual property, the intellectual property rights as a means of self-protection; coalition government or industry needs at the macro level up to guide the domestic LED patent portfolio to help businesses and carry out supplementary patent.
 
Visible, LED enterprises to actively explore overseas markets, while the need to strengthen quality control, improve technology patent reserves, improve service levels, establish a corporate brand image, so that China's LED illuminated "along the way."
 
Summary: LED overcapacity is a double-edged sword, it will not only bring the "price war", "business failure" and other issues. But also to promote the low-end enterprise reshuffle, some of substandard quality, ability is not strong, capital strength is not strong LED enterprises have gradually withdrawn from the market, ultimately leaving a powerful big business. Therefore, LED companies need to strengthen their technology development, through continuous reform and innovation, to enhance their strength, can withstand squally showers.

 

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