Reveals why LED companies have dismantled lighting business

Since the second half of last year, international key LED companies have announced the sale or split of LED lighting business. On September 23, 2014, the Philips Group announced that it will split the group into two, separate the business of healthcare and lighting, and further establish two companies. Subsequently on October 27, Samsung Electronics announced its withdrawal from the LED lighting market in all countries and regions except Korea. Following Philips’ announcement of the split of lighting from the Group, the recent German LED leader Osram also announced that it will split or sell the general lighting business and establish an independent company. In recent years, the global LED lighting market has grown rapidly, and the penetration rate of LED lighting has greatly increased from 11% in 2012 to 33%. Under such a large environment, why have international key LED companies separated their LED lighting businesses one after another? This indicates the development trend of LED lighting industry? This will bring important implications for the development of domestic LED lighting industry?

Reasons Why International Key LED Enterprises Strip Lighting Business

First, the low profit margin of the lighting business has become a development constraint factor. LED industry chain is longer, from the chip, package to the end product, the terminal product is divided into color TV, mobile phone and other LED backlight module, LED display and LED lighting. Most of the international key LED companies have transformed from traditional lighting to LED lighting companies, covering the entire industry chain's R&D and production. LED lighting is an important part of their business. However, with the intensified market competition in recent years, the profitability of LED lighting has declined. In the Samsung LED segment revenue, as much as 90% of the LED chips used in the panel backlight module contributed, the influence in the LED lighting market was weak; Philips has the world's first lighting brand in the lighting industry market and the highest market share However, in recent years, profitability has hovered below 10% for a long time, much lower than its medical business. The conventional bulbs, ballasts, and LED lamps and systems divisions that Osram plans to spin off are also not profitable. Therefore, due to the company's further development and investor pressure, these companies have separated low-profit lighting businesses.

Second, the rise of China's LED lighting companies, the pressure of market competition. China has the world's largest LED lighting production and application market. Due to the advantages of low cost and high efficiency, a large number of Chinese enterprises can quickly introduce new products, prices are closer to ordinary consumers, and are exported to various regions of the world. With the intensification of global LED lighting industry competition, international key LED companies have cut prices to seize market share. In 2014, Philips' LED bulbs dropped from $30 to $10-12, and Osram launched lighting products under $10. At the same time, large companies are affected by the overstaffing and inefficiency of their institutions, resulting in higher production costs and the gradual loss of market advantages. Therefore, with the rise of China's LED lighting companies, these companies have divested lighting business to meet market challenges.

Third, the main business transformation, focus on the high-end part of the industry chain. In the process of formulating a development strategy, international companies often emphasize that businesses concentrate on core capabilities of enterprises, and resources are concentrated on core businesses so as to enhance their competitive advantages and core competitiveness. Samsung Electronics stopped the LED lighting business outside of Korea, in order to achieve a more effective and centralized operation strategy; Philips will concentrate more resources on higher technology thresholds from the earliest exit of chip manufacturing and TV business to the current sale of lighting business. The more profitable health care business; OSRAM splits the general lighting business and focuses its business on high-margin markets such as automotive lighting, smart lighting and solutions. As a result, these companies' initiatives to separate their lighting businesses hope that they can gather more resources in the high-end part of the industry chain during the process of business transformation.

Reflect the three major trends in the development of LED lighting

First, China will become an important market for LED lighting. In 2014, sales of lighting products in China was 520 billion yuan, a year-on-year increase of 10.6%, of which sales of LED lighting products were 95 billion yuan, a year-on-year increase of 43.9%, and the market penetration rate increased year by year. LED lighting exports amounted to 9 billion U.S. dollars, a year-on-year increase of 50%. Sales in emerging areas such as the United States, Europe, and Russia have experienced explosive growth. With the advantage of manufacturing in China, with the divestment of LED lighting business by international manufacturers, the future global LED lighting product manufacturing base will be transferred to China. In 2015, China's LED lighting output growth rate will exceed 50%. With the further implementation of national plans to phase out incandescent lamps, LED lighting will lead the Chinese LED application market, and the penetration rate will further increase to 25%.

The second is the intensified merger and reorganization of LED lighting. With the intensification of competition in the LED industry chain, companies in the future are facing greater pressure from competition and pressure to survive. LED companies have more frequent mergers and acquisitions, their strategic intentions are more diversified, and the direction of integration has been constantly adjusted. The advantages of resources are further leading to the industry. concentrated. In 2015, the total amount of M&A in the LED industry is expected to exceed 20 billion yuan, and the number of M&A cases with a scale of over 500 million yuan will continue to increase. Especially in the field of LED lighting, as the performance of lighting products is increased and the cost is further reduced, homogenization of products will intensify the competition among enterprises. In order to build brand awareness and seize sales channels, lighting companies will usher in a crucial period of integration.

Third, the development of lighting products to the functional intelligent. With the divestment of traditional lighting businesses by key international companies, they are looking for sub-fields to develop. In order to move toward the high end of the value chain, key enterprises will further strengthen innovative research and development in automotive lighting, plant lighting, intelligent lighting and other subdivided areas, and provide alternative lighting solutions for different application environments, making lighting product applications diversified and intelligent. The development trend.

Enlightenment to Chinese LED Lighting Enterprises

First, the investment in LED lighting market returns to rationality. After China's LED lighting industry experienced a low investment period in 2012, investment began to show a warming trend in 2013. With the LED makers peeling off the lighting business, it indicates that part of the low-profit, low-value industrial chain will continue to shift to China. The relatively low threshold and low-tech characteristics of LED lighting in the industry chain have attracted a group of investors. Existing LED lighting companies will also invest further in order to expand the scale in order to expand their cost advantage. In order to avoid the low-level redundant construction of domestic enterprises, we should take LED application market demand as the guide, develop marketable products, and focus on opening up new sales channels. For the different characteristics of each link of the LED industry chain, according to their own strength to develop long-term development strategy, a comprehensive consideration of rational investment.

The second is to focus on product innovation and quality improvement. The shift of LED lighting business to China indicates that domestic competition has intensified. Domestic enterprises should focus on mining market segments to avoid homogenous competition. To expand the indoor and outdoor general LED lighting market, companies should further identify the development direction of commercial lighting, landscape lighting, tunnel lighting, special lighting, street lighting and other subdivided application fields, and develop large, medium and low-power LEDs for different application requirements. Lighting Products. Enterprises should strengthen technological upgrading, promote the conversion of medium-to-low-end production capacity to medium-to-high-end production capacity, refine division of labor and cooperation, and avoid low-cost vicious competition for the same products. On the other hand, companies should focus on improving product quality. Europe and the United States have strict requirements on the performance of LED products. By increasing product quality, the company can expand the scale of its exports. Enterprises should regularly perform inspections on safety, energy saving, environmental protection, and other aspects of LED lighting, lighting, and accessories, and other aspects of lighting to strengthen their own management.

The third is to seize the opportunity of integration and reserve core intellectual property rights. International large-scale companies will peel off the lighting business through sales or spin-offs, which will provide opportunities for domestic companies to acquire internationally. In the process of mergers and acquisitions, domestic enterprises can obtain a wealth of patented LED technology. Previously, Philips Lighting was acquired by China and obtained more than 600 patents related to LED production and automotive lighting, providing an important foundation for domestic companies to enhance their intellectual property reserves and strengthen their technological research and development. Domestic enterprises should seize the opportunity to innovate and drive technology research and development, accumulate their own core intellectual property rights, and at the same time use international acquisitions and mergers and acquisitions among companies to strengthen the use of external resources in mergers and acquisitions for my own use and enhance the overall strength of the domestic LED industry.