Low-end LED industry: giants fell on low prices

On July 2nd, Zhang Weiqi had always seen an ominous hunch in his heart when he saw a circle of people around the Xiongji Lighting Factory (hereinafter referred to as Xiongji Factory) in Zhongshan City. Xiongji Factory is a small LED company with a scale of over 100 million yuan in Zhongshan Guzhen. Zhang Weiqi is a supplier of Xiongji Factory. This day, he came to Xiongji Factory and was prepared to get back the money for the past three months.

"The boss's run". Among the crowd, I don't know who told Zhang Weiqi. After owing the wages of several hundred workers and the payment from dozens of suppliers, Xiong Jixiong’s owner Xie Yingxiong and his family members are now missing. Zhang Weiqi suddenly stupid, his more than 20 million in payment may not be able to recover a penny. Soon, the news of the running of the male banner factory boss exploded in the ancient town of Zhongshan, which is known as the “Capital of Chinese Lighting”.

According to a survey conducted by the reporter in Zhongshan, a large-scale plant of this size has closed without any warning. This has caused many lighting business owners in the ancient town to feel unbelievable. Everything seemed to be unexpected, but it was reasonable. Several suppliers told reporters that Hung Kee's factory is known for producing low-end LED lamps, and desperately slashed prices on the basis of disregarding quality. Eventually it left itself in a dead end. .

At the same time, the current status of Hsiung Kee may be a microcosm of the low-quality, low-cost companies in the LED industry.

At the beginning of June, Gaogong LED held a summit forum in Guangzhou. At the forum, some experts said that the LED industry is now a mixed bag. In the next few years, the market will still face reshuffle, and more than 50% of SMEs may withdraw from the competition.

Xiong Ji's annual sales scale exceeds 100 million yuan

Zhongshan Guzhen is located at the intersection of Zhongshan, Jiangmen, Foshan City, adjacent to Hong Kong and Macao, and is famous for lighting both at home and abroad.

According to the official website of the Guzhen Town Government, from 1982 to the present, the local lighting industry cluster with 11 townships in the surrounding three cities and towns with an annual output value of over 100 billion yuan has been formed. First, it is the largest professional lighting production base and wholesale market in China. The town has a total of 12,700 industrial and commercial enterprises for lighting and accessories. In 2012, the total output value of the lighting industry reached 15.81 billion yuan, accounting for more than 60% of the national market share.

The Xiongji Factory is one of the few companies with more than 100 million yuan in sales. In the past two years, as the LED tide has spread throughout the country, the plant has also switched from traditional lamps to LED lamps.

On July 1, the supplier Luo Ziming sent more than 20,000 yuan of goods to the Xiongji factory. On the morning of July 2nd, the Xiongji factory called again and asked Luo Ziming to send some more (goods). Who knows that on the afternoon of July 2th, there was news of the boss running.

The township propaganda office gave a press release to the reporter: At 16:00 pm on July 2, the Ancient Town Comprehensive Management Office reported that Xie, a lighting factory operator in Guzhen, Zhongshan, suspected to have escaped, suspected of contract fraud and refusing to pay labor compensation. , causing suppliers and workers to gather in the factory.

On July 4, the reporter saw outside the Xiongji factory that the police were loading a box of carton products and then transported them. A number of workers are still outside the door waiting for the government’s opinions on the processing of wages.

Luo Ziming did not perceive anything strange before the owner of the Xiongji factory ran on the road, but according to the workers’ introduction, on June 27, everyone had no specific things to do. Many people played mobile phones in the workshop. Zhang Weiqi mainly supplies LED lamps to Xiongji. "It was all hard-earned money. He took this one and I did it in one year." He provided reporters with a list of Xiongji factory suppliers. On this list, the Xiongji factory owes more than 40 supplies. Business tens of millions of dollars in payment.

"Our suppliers have simply calculated that the total amount owed is estimated to be more than 50 million yuan." Zhang Weiqi said that he is not the worst of these suppliers, and several people are owed more than 4 million yuan.

From July 4th to July 7th, the reporter dialed the phone number of the Xiongji factory owner Xie Yingxiong several times, but his mobile phone has been shut down.

The price "is not the lowest, only lower"

Xiongji works mainly in low-end products in Guzhen. In the industry, this product is called "bad goods." The distinctive feature of "bad goods" is that the price is very cheap, but the quality of the product is not guaranteed at all.

Luo Ziming is a supplier of LED shades for Xiongji. He told reporters that Hung Kee was looking for him to purchase and chose the lowest-end products. In this way, Hyun Kee can ship at a very low price, thus quickly occupying market share.

According to the supplier, Hung Kee’s lighting prices are still somewhat rational. Taking a 3W LED bulb as an example, the selling price is around RMB 5. This price is still slightly meagre, but later, Hyun Kee’s The price is only 3.8 yuan. The total of suppliers, this price can not make up for even the cost.

Zhang Weiqi said that Xiongji's choice of such a road is also helpless. After several decades of development, the township has matured its industrial facilities. Almost any spare parts and materials can be purchased in this town. "Only you can't think of it, you can't buy it," he said.

This industry-wide support makes the threshold for entering this industry very low. Rent a factory building, buy a few irons, purchase the necessary accessories from the town, and go home for simple assembly. In the ancient town, reporters everywhere can see such workshop-style enterprises, and some have a signboard, and some have no sign. The official website of the town also shows that the town has registered more than 10,000 individual business licenses, and over 60% of households have become large and small business owners.

Zhang Weiqi said that the threshold is too low and there are so many companies entering the company. In order to sell things, everyone can only conduct vicious price competition. "There is no minimum, only lower." In the interview, a lighting business owner shared his feelings with Zhang Weiqi.

Wu Yulin, chairman of the Foshan Lighting Association, said in an interview with reporters that a bulb can be purchased for more than 3 yuan in Zhongshan. In some places, this type of lamp may sell for tens or even hundreds of yuan.

On the one hand to do low prices, on the other hand to make money, so that some companies in the quality of products to do things. Zhang Weiqi said that taking a lamp cap as an example, a qualified lamp cap cost at least 8 cents, and some manufacturers shipped less than 8 points, and shipping at this price would probably be cut corners.

According to Zhang Weiqi, at the beginning, the top of the lamp head was made of glass material. This material is resistant to high temperatures, but the production equipment is expensive. A set needs several million yuan. The glass must be soldered and the process is complicated.

Later, some enterprises in Guzhen began to use plastic instead of glass, so that no solder is needed, and production equipment costs as much as 200,000 yuan. The glass material can withstand the high temperature of the five or six Baidu and has good flame retardancy. Plastics are also classified as high-temperature resistant and non-high-temperature resistant. In the beginning, we also used high-temperature-resistant plastics. Later, companies used non-flame-retardant and high-temperature-resistant materials. The difference between these two kinds of plastics is that the price of high-temperature resistant plastics is between 20,000 and 30,000 yuan per ton, but not one ton of high-temperature resistant materials as long as 8,000 yuan.

Zhang Weiqi said that in addition to the different materials at the top of the lamp cap, the thickness of the lamp cap metal shell is also different. In order to save costs, some try to reduce the thickness of the metal shell. As a result, the hand is pinched. In his eyes, this kind of thing is simply unqualified and cannot be sold. He said that in fact, many people also know that this approach is not a permanent solution, but in the fierce competition, you do not have to do others.

Like many companies in the ancient town, the Hsiung Kee plant falls into such a low-cost vicious competition. Workers at the plant told reporters that in addition to purchasing low-cost accessories, the factory will even save some processes to further reduce costs. The consequence of this is that product quality is not guaranteed at all. An unconfirmed statement obtained by the reporter was that some of the LED lamps at Hung Kee Factory were broken in less than 20 hours.

It is understood that in this way, the sales volume of Hung Kee's factory rapidly rises to the top of the ancient town, but its after-sales service has been severely lagging behind, and the image of product quality has been continuously damaged. Finally, it has been developed to sell products at prices below cost.

Multi-interest outcomes

Wu Yulin told reporters that LED products are entering this market as ordinary consumer goods. However, the market is slowly opening up, and the number of manufacturers and production capacity is explosive growth, so that some companies will certainly be eliminated.

On the other hand, he believes that the country has no uniform mandatory standards for LED products, so the same type of lamp costs from 3 yuan to 300 yuan, which has caused confusion in the entire market. Some manufacturers want to quickly occupy the market, desperately reduce prices, put the quality is done very poor, and ultimately eliminated by the market.

According to Quan Jian, president of the Guangdong Provincial Lighting Association, not only Guzhen, other places, and other industries, the price war is fierce. However, in general, things in the ancient town are indeed cheaper, and there are also more things to be done. The price determines the cost. "This approach may have temporarily gained some benefits for enterprises, but it will cause great harm to the entire industry and the area where the company is located," Quan Jian said.

In fact, this is the second boss run that Zhang Weiqi encountered in more than a year. The last time he lost more than 50,000 yuan, it has not been recovered. “Everyone has no sense of security. The running incident is like a mine. Everyone does not know which day will be detonated by their own side.” He said that many people, just like him, have no way to do business practically.

Hung Shibin, executive chairman of the China Home Appliances Commercial Association Marketing Committee, said that this mode of desperate low-price competition has damaged the interests of many parties. Companies like Xiongji that sacrificed quality to lower prices will end up failing. The living suppliers, to a certain extent, must pay for the failed companies. If the low-quality products are rampant in the ancient town, the brand image of the "Lighting City" will also be affected.

Earlier this year, the Guangdong Provincial Bureau of Quality Supervision announced the results of spot checks on 51 batches of LED street lights and light source controllers. Among them, 20 batches were unqualified and the rate of discovery of unqualified products was 39.2%. This also means that a large number of unqualified LED products are flooding the market.

Zhang Xiaofei, director of the Gaogong LED Research Institute, also said in the above forum that although the market demand recovered in the first half of the year, the overall oversupply pattern of the entire industry has not been fundamentally corrected. There is an excess of production capacity from the extension, chip, package, and downstream. Those companies that rely on low-quality, low-cost livelihoods will have smaller and smaller living space in the future, and their market share will increasingly be concentrated on companies with brands, channels, and innovations.

Of course, some analysts have also stated that price competition is one of the common means for enterprises to compete. If these low-cost companies can improve the quality of their products by improving their processes or increasing their technological content, they can do products that can withstand the test of the market. There may be chances of winning in the down elimination.