Research and Analysis of LED Enterprises' Price Competition in 2012

According to statistics, 80% of China's LED companies rely on exports. Affected by the sluggish market in Europe and the United States and the constant price reduction by foreign customers, orders and profits of domestic LED companies have fallen sharply. Year-to-date, there have been many cases where mainland LED companies' orders from Europe and the United States have fallen by 30%. At present, the domestic LED terminal application market has not yet been fully opened. Under the continuous attack of domestic and foreign markets, quickly occupying the market through low prices seems to be the most direct and effective means to get rid of difficulties.

Industry analysts believe that the current continued decline in prices is mainly based on the upstream capacity expansion is too fast, while the downstream application market development is not large enough, resulting in short-term excess capacity caused by the mismatch of upstream and downstream production capacity. Whether it is an international enterprise or a domestic enterprise, the market has not been as optimistic as expected after a huge investment in the early stage, especially for the SMEs whose financial strength is lacking, in order to survive, they can only choose to occupy the market with “low prices”.

Last year, the price of chips dropped by as much as 30% to 50%. Industry insiders lamented that prices have fallen too sharply, and it was asserted that 2012 is likely to be a "price year" for the LED industry.

"Price war" has a long history. It appears in today's LED industry. Many people have different views on this. Some people think that this is more conducive to the development of the enterprise, and it is bound to allow companies to seek technological breakthroughs and improve management capabilities and reduce costs. However, some people believe that most of the current low-cost competition in the LED market is achieved through the adjustment of raw materials, and is still in an unhealthy state of development. The price war as a traditional means of competition appears in the rapidly developing LED industry. What impact will it bring to LED?

Avoid the Abnormal Development of "Bad Money Drives Out Good Money"

In January this year, in the highly price-competitive South Korea region, first-line lighting brand manufacturers launched LED bulbs that replaced 40W incandescent bulbs at a price of 10 US dollars or less at an unexpected price, making Korea replace the average of 40W bulbs. The price reached 10.4 US dollars, a drop of 13%. Coincidentally, in April, a well-known domestic LED companies, high-profile announced after mid-April, the brightness of the equivalent of 40W, 60W bulb lamp ex-factory price will not exceed 5 US dollars. When the news came out, the industry was shocked. The company was called by the industry a new generation of "price saboteurs" following South Korean manufacturers.

When it comes to the reasons for price cuts, most companies have almost the same view, that is, they hope to attract large orders from international giants through price cuts, achieve large-scale production, seek further price cuts, and quickly open the domestic LED lighting market. However, it has to be noticed that some small-scale enterprises follow the trend of reducing prices by mixing inferior products with the market, trying to fish in trouble and grab a glass of cake.

Since the LED industry does not currently have a unified national standard, the quality of products on the market is uneven, which in turn results in very inconsistent prices. Many companies use low-quality raw materials for decompression costs and occupy the market with ultra-low prices. This is not only detrimental to the healthy development of the LED price system, but also the consumer's confidence in the use of LED products. For example, Guan Yong, general manager of Zhejiang Sunshine Lighting Group Co., Ltd., said: "The blind low-cost war will cause the LED market to distort the bad money and drive out the good currency."

However, it must be felt that the major important factor of price decline is the fatal killer of the enterprise. Low price war, Lu Weidong, general manager of Austrian Light China, told “Semiconductor Lighting” reporter: “Ozhuang’s bright will not be caught in price competition. We have always been this kind of view, and only the uncompetitive companies will fight price wars. In fact, this blind price reduction is not conducive to the development of the industry and the cultivation of the market. We believe that with the continuous improvement of technology, the control of material costs and changes in the design structure are the key to reducing costs. Of course, according to the international We will also adjust the price of the chip to reduce the cost of the chip, but we will not maliciously conduct price competition."

According to Henderson Marketing Director Zuo Huaimin, “For a price to have a healthy concept, a good company's good product must give it a good price, it can continue to provide good products, provide better quality for the community. The services and products, if you blindly compress the price, will lead to a reduction in corporate profits, no matter whether the employees or the company will lack financial support for development, not to mention the brand.The future will be a crude way, even if the price is cheap but the quality is There is no guarantee that this is also an irresponsibility for consumers."

Use rationality to see price cuts

Taiwan's presided over the "big brother" Wu Zongxian to switch to LED, visible LED industry's hot degree. As the world's promising sunrise industry, LED has attracted people from all walks of life. Looking at the mainland of China, the pride of the LED industry can be seen from three aspects: for large companies in the industry, competing for listing; for medium-sized companies, competing to push new products, expand production; for "no technology, In the case of small companies without talents and funds, even shoe-making companies can turn into LED companies overnight. However, the lofty pride of the company cannot be exchanged for the smiling face of the LED industry. In 2011, due to the economic downturn in Europe and the United States and the rapid expansion of production capacity and other factors, LED companies have a "closed tide," and "grabbed numerous heroes to compete."

The development of the LED industry is a rational market behavior, and its development needs to be gradual. Just as one person in the industry frankly stated: “The development of any industry cannot replace the steady pace of pride with momentary pride.” The lessons learned from the rapid expansion of the LED industry also apply to the “price war”.

“When the chairman of the board of our company just started to make energy-saving lamps, the market was also a low price, and even some manufacturers had achieved three or five dollars. I remember that at that time, the chairman of the company convened a general meeting of the company against the market conditions at that time and clarified the direction of the company’s development. Special emphasis on our company is to do real energy-saving products, the first task is to strictly protect product quality, we must be able to have a good quality for every product that the company produces.” A senior lighting company that is in transition to LED lighting Say.

When it comes to price wars, the senior executive believes that "price wars" are price competitions at the same quality level, rather than "bad money drives out good money," and end-users' confidence in LED products fades. "The current LED market, the price is not the lowest, only lower, especially in many domestic companies are not mentioning the performance of products, it will only fight the price, the result of low quality products impact the market, this kind of malformed way of competition It is not good for the long-term development of the industry, and it will even hinder the sound development of the industry.” He said that if the production cost is reduced by sacrificing the quality of products, it will only be a short-term behavior, and it will create a vicious circle, not only with high prices and good quality. The products are impacted, and the products with low prices will be unattended.

Chen Bin, general manager of Guangzhou Zhonglong Transportation Technology Co., Ltd., told reporters that the industry has been discussing when the LED begins in the first year and holds great promise each year, but it is also particularly disappointing. In fact, the LED market is growing every year, and the price is decreasing every year. This is a normal trend. Only the entire industry is too impatient and hopes that the price will drop to a low level. In fact, regardless of the expansion of the market size or the decline of prices, we must follow the basic laws of the market, and there should be a gradual process of popularization.

Chen Bin said that LED practitioners must realize that: First, the market is growing every year, and the growth rate is not small, each year to maintain a speed of more than 30%. Second, prices are downgraded every year, most of which exceed 10% or even higher. This change is a normal market change. If the market price suddenly drops by 50% today, this can only mean that the LED industry has been making huge profits. Chen Bin also suggested that there should be a clear understanding of the price war from three aspects. First, the entire industry must first have a clear concept and definition of the product. Second, the application side should clearly understand that price and quality are positively related to one another and cannot be purely pursuing low prices. Third, companies in the industry must clearly realize that companies must rely on quality in order to achieve long-term survival and development in the market. The use of special treatment methods to achieve certain success in a certain project or stage does not mean that it has the ability to develop in the future.