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    Big Profit Drop in LED Industry

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    • Published : 12/27/2012
    LED industry has developed too fiercely and it once was the focus of venture capital. But there are too many bad things happened to the industry. Although continuous subsidies from government, there are too many LED companies can’t go ahead easily. 

    Status: Big Drop of Profit and Shutdown of a Number of Companies
    Since bankrupt of JDL Enterprises Group and Bolunte Optoelectronics in 2011, and ViewLED Optoelectronic this year, another big company called Shenzhen Hiboled Photoelectricity invested over 100 million RMB in LED display is nearly bankrupted with no payments to suppliers and no salaries to staffs.
    However, there are dozens of home appliances big companies are going to invest into lighting industry. Shanghai Youshi Lighting director said that he didn’t think it was a good business as for the new coming of lighting companies. Mr. Chen Yansheng, vice chairman of China Lighting Appliances Party said: “Selling lamps and selling TV are two different things. There won’t be good news for home appliances companies using their own sales channel to sell light fittings.”
    New emerging LED industry was mixed with good and bad, big and small companies and factories. Some enterprises took strategy of low-quality and low-price. And some LED products are rubbish products in the market.

    Most Enterprises without Core Technology
    Mr. Chen Yansheng told reporters that there are over 50% light fixtures manufactured in China for the lighting market in Japan. China Lighting industry has taken up certain status in the world, but it isn’t strong enough. There is about 2,00 billion of RMB market capacity for lighting industry. But why are there so many enterprises struggling in the industry?
    According to the statistics data of Guangzheng Hengsheng Consulting, there are only Elec-Tech, Nationstar, Neo-Neon involved in upstream chip materials among enterprises in Perl River Delta. Nationstar is also big in LED encapsulation industry. And other companies’ main businesses are on downstream lighting and application area. There are only a few companies with operation income over one billion RMB. 

    State Subsidies Increase and Enterprises Expand Investment More
    Commissioner of Science and Technology Department of Guangdong Province, Mr. Li Xinghua said in public speech that financial investment strongly supports innovation and breakthrough of key field in LED industry. State subsidies for new energy brings a new round of investment and some insider said the LED “investment” was called as “herd effect”, blind obedience to follow and the return of LED investment will be more unpredictable. Secondly, big corporations got state subsidies and invested on LED projects crazily and built up industrial base, but their profit has been got from state subsidies all the time and so their sustainability is controversial. For example, San’an Optoelectronics’ third quarter profit was 0.667 billion RMB but state subsidies were over 3.23 RMB, nearly half of total profit. Coincidentally, Elec-Tech’s profit in the middle of this year is 0.12 billion RMB but state subsidies is up to over 0.15 billion RMB, and the data of Nationstar is about 25%. 
    However, excessive investment makes industrial capacity oversupply and focus on the middle or downstream with lower technical barriers. LED enterprises, including listed corporations, will face cruel process of fittest survival. Reporter’s survey shows that expansion investment and production makes a number of fraud and bankruptcy for LED industry without core technology. With the intensification of competition, domestic LED industry is expected to be washed out over 50% in the coming three years.