Chinese Lights Are All Over

- Aug 24, 2018-

"I can't do it." At two o'clock in the morning, in a big stall in Zhongshan Ancient Town, Li Jie indignantly lowered his chopsticks and raised his glass. Sitting opposite, Xu Zhenhua nodded and put down the shrimp he was peeling. He also took up the cup. "The price of raw materials has risen like this, and it won't be long." He paused. "The key is that we are too late to enter the industry." The two men clink glasses and drink them away.——LED lighting

Li Jie is the owner of a glass fittings factory in Jiangsu Province and a supplier to Xu Zhenhua, who is the owner of Zhongshan Deni Lighting Co., Ltd. Every year, Li Jie will come to the ancient town for a month and meet the customers for more than 10 months now. But in recent years, he feels that lighting business is becoming more and more difficult.——LED lighting

If toys have Dongguan, furniture has Lecong, and lighting up, people will think of ancient towns. Located in the northwest of Zhongshan City, Guangdong Province, Zhongshan, Jiangmen, Foshan, three prefecture-level city junction town, a total area of 47.8 square kilometers, under the jurisdiction of 12 administrative villages, a community. Since the reform and opening up, lighting industry has become a pillar industry in ancient towns. Guzhen is one of the major lighting professional markets in the world and the largest lighting professional production base and wholesale market in China. In ancient towns and adjacent towns, there are tens of thousands of lighting and accessories enterprises registered, and if not registered, there may be as many as 340,000. According to the data, the output value of Guzhen lighting industry reached 16.08 billion yuan in 2014, accounting for 60% of the national market share of civil lighting; the total export value was 480 million dollars, and the products were sold to more than 130 countries and regions such as Hong Kong, Macao, Taiwan, Southeast Asia, Japan, the United States and Europe.——LED lighting

Since 1990s, a new economic form called "professional town economy" has appeared in Guangdong. Its characteristics are that the economic scale is more than one billion, billions or even ten billion yuan, the industry is relatively concentrated, production, supply and marketing integration, to the town level as a unit. The most notable characteristics of these specialized towns are "small businesses, big industries, small products and big markets". Ancient town is one of the first professional towns to start the title.——LED lighting

The combination of ancient town and lighting industry dates back to the winter of 1982. Yuan Daguang, a villager in the ancient town of Haizhou, went to Hong Kong to visit relatives and bring back a tea-colored glass wall lamp. He spent the whole winter pondering the lamp, then went to the surrounding Xiaolan, Shunde, Foshan, Jiangmen and other places to buy spare parts to assemble and inspect the market. The first private lighting company in the ancient town was born. Subsequently, a "pre shop and post factory" mode of "husband and wife shop" and "brothers shop" quickly sprung up in ancient towns.——LED lighting

Lighting is a low threshold and high profit industry. Manufacturers of finished lamp are usually not responsible for production. They buy various accessories - including lampshades, light sources, drives, hardware, wires, etc. - back to assemble themselves. At the end of 1990s, the gross profit margin of lamps could reach 50%. When Li Jie entered the industry in 2006, the gross profit margin of the lamp basically stabilized at 30%. It is not surprising that this period of town, an unassuming market, received tens of millions of orders a year. Some of the earliest buyers in the town were people who bought and sold lamps and lanterns all over the country. For them, the town was the most comprehensive wholesale market, while others were employees of domestic engineering units (such as hotels, clubs, buildings).——LED lighting

But from the end of 2016, Xu Zhenhua felt that business was getting worse and worse. He opened his factory in 2010 and started selling it domestically, but now he is exporting it to customers mostly from Israel and Turkey. Over the years, there have also been some changes in the buyer community in the town, supporting the town's business more and more foreign buyers. One of Xu's clients is an Israeli engineering company, owned by an Israeli man in his sixties, who visits the town three or four times a year. Another Turkish customer opened several outlets in a local wholesale market, and Xu Zhenhua's factory worked for him. Customers in these countries buy more frequently, buy less, and are more flexible than their European counterparts, who usually have a long-term sales plan.——LED lighting

"Trading volume is actually OK," said Xu Zhenhua, who said the Israeli customer's purchasing volume has been rising slightly over the years, and last year it was about $34 million. "But the profit is too thin, and it's good to have a gross margin of 10%. Apart from expenditure, the profit is less than 7%." His factory is in the horizontal bar, and there are only twenty workers in the factory. The fence and the ancient town are next to each other, and it is 20 minutes' drive without traffic jam. As the land in the old town became more and more tense, factories moved to surrounding towns, and the bars were a major production base.——LED lighting

Since the beginning of this year, dozens of new environmental protection policies have been formally implemented. It is difficult for most small lighting workshops to fully meet the requirements of environmental protection policies. In addition, labor and rents are also rising, which is the main reason for the thin profits.——LED lighting

"The price of raw materials has gone up too much," explains Xu Zhenhua. The rising price of raw materials is largely influenced by environmental protection at the end of 2016. On Nov. 28, 2016, the Central Environmental Protection Inspection Group was stationed in Guangdong. Ceramics, chemicals, stainless steel, furniture, plastics, coatings, hardware products and other industries with serious pollution discharge were monitored. "Many small factories that fail to meet the requirements of environmental protection have been stuck. Large factories have high costs. They have to pay taxes, hire workers, and have more bills. If the supply exceeds demand, the unit price will be raised. The price of raw materials has risen like this.——LED lighting

"The industrial oxygen we need for making glass has increased by 50% since last year. The cartons used for packing have increased by 30% since the year before. Li Jie said. And labor, rent and other expenditures, has been rising over the years, "In 2006, the horizontal column factory, a few yuan a square meter monthly rent, now rose to more than 20 yuan, then the wages of workers were only a few hundred a month, now to 34,000." Li Jie said that there are now 340,000 lighting enterprises in the ancient town, which has formed a situation of more monks and less porridge. People can only scrape prices, so that the profits will be even less. The golden age of high profits for lamps and lanterns has passed.——LED lighting

Ancient town of Lantern

Stores, stores and electricity providers

Prior to that, the ancient town had experienced an integration from stores to hypermarkets.

Xu Zhenhua of Jiangxi still vaguely remember the ancient town that belonged to the market age. When he came to ancient town in 2003, he was just 22 years old and graduated from university. Before he came to Guzhen, he worked in a toy factory in Dongguan, earning 9 yuan a day and deducting 2 yuan for living expenses. So after six months, he went to Foshan to do warehouse management in a furniture factory in Lecong town. The barn to be moved was manual work. Xu Zhenhua felt unhappy and ran to an old town not far away to a village called Liufang. The six square is an old industrial area. The lighting factory in the ancient town was then concentrated here. But it's not as high as Dongguan, with no five or six storeys of factory buildings, fish ponds and no painted, tile-covered dwellings.——LED lighting

Xu Zhenhua took his diploma and looked for work everywhere for a week. "People don't want us. They want experienced workers. At that time, some of them were looking for workers. They want to be married and able to bear hardships at the age of thirty or forty." The monthly salary of experienced workers is seven or eight hundred yuan, and that of ordinary workers is four hundred and five yuan. The local people recruit workers, do not say "miscellaneous workers", say "Shi Gong". When Xu Zhenhua asked, he knew that "hard work" means "anything to do", which is more pleasant than "miscellaneous workers". At that time, no temporary residence permit will be repatriated to their homes, before repatriation to the mountains to dig a month's stones, to give hundreds of dollars, equivalent to the return home fare earned. "People here are a little bit discriminated against foreigners." He recalls.——LED lighting

Among the earliest outsiders to the town, some were Wenzhou and some were Taiwanese. They had money on hand and started a company. But more outsiders to the ancient town, like Xu Zhenhua, first work in a factory, sure to do their own, jump out.——LED lighting

Before the stores were built, the streets were open, and Xinxing Avenue, near the post office in Guzhen, was the busiest. A pavement is jointly rented by five or six lamp companies, many of which have 10 or even 20. Rent the ceiling for the chandelier, the wall for the wall for the wall lamp, and the floor for the lawn lamp - it was agreed at the outset not to make the same kind of product. Xu Zhenhua also rented only 3 square meters of walls, and the rent was more than 7000 yuan per month. The lamp enterprises in ancient towns were originally ordered by this way. The arrival of outsiders also spawned the local booming rental market. Li Jie rented a warehouse in Guzhen. The landlord, who is said to be worth 2.3 billion yuan, also rented an 8,000 square meter factory building.——LED lighting

Just one year before Xu Zhenhua arrived in the town, the town held the first International Lighting Exposition (hereinafter referred to as the "Lighting Exposition"), and the main venue of the ancient town's Lighting Plaza, the earliest lighting store in the town, was built at a high cost. Ever since 1999, the Lighting Fair has been an annual event in Guzhen. It has also attracted buyers from all over the country and even overseas during the peak period of business.——LED lighting

The Star Alliance is one of the biggest lamps and lanterns in ancient town

The appearance of the store made the lighting industry of ancient town move from concentration to concentration. According to legend, when Times Square opened in 2009, more than 50,000 square meters of floor space were fully rented, even the opening ceremony was omitted. Enterprises stationed in stores want to attract quality customers, after all, roadside stores may give people the feeling of "dirty, messy, poor".——LED lighting

To this end, they are willing to spend a lot of money to decorate, a square meter of rent may be two or three hundred yuan, decoration fees for 78,000 yuan. Times Square stores are expensive. The craziest time is 450 yuan per square meter.——LED lighting

Now in ancient town, it takes half an hour to ride the inter city train from Guangzhou. Get off the train, go down the stairs, walk to the exit, and the advertising of the lamps and lanterns brand can be seen everywhere. In the scorching sun, the motorbike owners came forward. A few steps out of the station, you can see a 300-meter-high building named Li and Lighting Expo Center, a lighting store that opened in October 2016. Along the Qijiang Highway to the west, and then turn north to Zhongxing Avenue, less than 4 kilometers, there are dozens of stores passing by, Kaiyuan Lighting City, Huayi Square, Baisheng Lighting Square, Light Cube, International Trade Square, Star Alliance... These stores are expensive to build, mostly built in recent years.——LED lighting

But the shopping season is not long, followed by the impact of the electricity supplier. Since 2015, stores have become increasingly deserted, and many stores have reduced orders. The electricity supplier broke the traditional marketing channel. In the past, when the annual light fair, lighting stores crowded, at the end of 2015, many stores have reduced rents. According to the Daily Economic News at that time, taking the Star Alliance store as an example, the rent of its LED professional stores has basically been reduced to less than 100 yuan per square metre, slightly more than the shops are only 35 yuan per square metre. Rents at most stores have fallen by 40 to 50% year-on-year, and street stores have been plastered with signs of subletting out of doors. Taigu Lighting Plaza, which was opened in 2013, was closed in early November 2015. "The Star Alliance looks magnificent, but it is actually losing money." Xu Zhenhua said.——LED lighting

In ancient towns, checks are the prevailing way of payment. Buyers and sellers do not trust each other, so look for the consignment Department as a third party, the goods received by the consignment department, the payment is also collected by the consignment department. But when the consignment Department receives the goods, it is a cheque to the supplier. The supplier can't get into the bank until a month or two. Before the cheque expires, the supplier can also use the cheque to pay for the supplier's goods, and the supplier can use the cheque to buy raw materials.——LED lighting

"Before profits were high, money was earned, no one ran. Now that we can't earn money, some people want to get a run. Li Jie said. If someone runs, the cheque in hand is empty cheque, waste paper. Millions of dollars can't be paid, and the business even went bankrupt. Since the beginning of 2016, more and more lamp enterprises have asked for payment to be delivered. But there are always new people entering the industry. In order to get the order, they still agree to deliver the goods first. "Bad atmosphere, no one can do well." Xu Zhenhua said.——LED lighting

Nowadays, few companies like Xu Zhenhua have jumped out and started factories, but there are still some new entrants to the industry. They do not have their own factory, just put in a deposit of 1000 yuan, you can Taobao or Tianmao shop, look for factory supply online.——LED lighting

Because it is difficult to transform small factories, over the years, the town has developed a model that is responsible for production and sales. Factory inventory are recorded in a database, open Taobao shop can enter this system, check the style, inventory situation, the morning received orders, the afternoon can be shipped. The big lighting factory began to transform and develop online business. "But now the operating cost of the Internet is not low, even higher than the traditional physical stores, factories can not make much money." Xu Zhenhua said.——LED lighting

There is also the problem of recruitment. "The industry here is too concentrated to do well. A worker at my side did not happy, told me I did not do, let me pay him, maybe he will go to another factory in the afternoon.——LED lighting

Overseas market and independent innovation

The domestic market is so unstable that many enterprises are looking for overseas markets.

"We must keep pace with the domestic market." Jin Shengxi said he was deputy general manager of Zhongshan Longqi Lighting Co., Ltd. Long Qi in the ancient town has been called a medium-sized enterprise. Founded in 2003, the company started making explosion-proof glass and flat glass, and began making lanterns in early 2008. Flower lanterns are decorative lamps and lanterns - a wide range of classification, divided into outdoor lights and indoor lights, lanterns are one of the indoor lights - initially, Longqi also do domestic sales, but from 2009, Longqi gradually to foreign brands do OEM and ODM production model, basically abandoned the domestic sales business. Its customers are mainly from the United States.——LED lighting

"The big difference in the US market is that it's quite traditional. First of all, its house structure determines the choice of lanterns, and secondly, from the aesthetic point of view, Americans prefer a more sober, old-fashioned style, not as much as the domestic renovation. Jinshengxi said to the first financial weekly.——LED lighting

In the United States, the traditional offline channel is some big merchants such as Costco, Wal-Mart or department stores, building materials market. They sometimes go directly to factories, sometimes through agents. Long Qi's products are sold by agents, and then transferred to these big supermarkets or shopping malls in the United States. Orders will be relatively large and relatively stable.——LED lighting

Jin Shengxi's feeling is that after the 2008 financial crisis, the U.S. market is growing, while the European market is down smoothly. Another is Southeast Asia and the Middle East market. "We have several American customers. I feel that their demand for this year is more than that of last year. There is a customer order increase of 20% over last year.——LED lighting

But the profits of export business are also very low, and net profit can be controlled to 10%. "It may reach 20% or 30%, but business is unstable." Jin Shengxi said.

At the same time, the domestic market is slowly shifting from decentralization to concentration. Some big lighting companies, such as Opel, already have a very open network, although originally for commercial lighting, but it is easy to switch to home lighting. If there is a lack of channels for small factories, it is hard to compete with these big companies online unless they go online.——LED lighting

For enterprises such as long Qi, there is a way forward: independent design and product innovation.

"In the lighting industry, it is very difficult. The formulation of knowledge innovation is correct. But in my understanding of the lighting industry, there is basically no possibility of innovation. How can you innovate if you have low threshold and low input? Innovation is just the innovation of appearance. " Jin Shengxi said.——LED lighting

The lighting industry in ancient town started by plagiarism. Xu Zhenhua still remembers going to Milan Furniture Fair with a Guangzhou exhibition company in 2012, which was his first time to see an exhibition abroad. Not many people thought to go, to the Milan Pavilion site, he knew that the original not only ancient town, Shunde Le from more than 900 people, Dongguan Daling Mountain also came to 6,700 people, as well as from Beijing, Shanghai, designers flying. Everyone took a professional camera to take photos. Every day when he got back to the hotel, there was Wi-Fi, and he quickly sent the pictures back to the factory. "We stayed almost 10 days, and some of the factories were coming out of the prototype, but my former boss was still calling the design pictures - he was almost 50 years old and didn't play with his cell phone very much. This is the information age.——LED lighting

Qi Long Group is located in one of the ancient town's production lines. (Fig. Li Ziqi)

With rapid plagiarism and production, as well as extremely low prices, these products are welcomed by the market for the group of consumers who are relatively demanding in product design, but not financially able to buy a design brand of several thousand yuan a lamp.——LED lighting

"When I was working in that boss's factory, people said I was a designer. I'm sorry, China has no design. It depends on whose information is faster, who can see the most popular things, and what people design can lead the market." Jin Shengxi said.——LED lighting

"Plagiarism" has become the biggest reason for these Chinese enterprises to be criticized by western public opinion. A foreign designer attending Milan Design Week told First Financial Weekly that in order to prevent plagiarism, they would even avoid any formal exposure in China until the product gained influence. On the other hand, it is undeniable that the "shanzhai" lighting products let these consumers know the corresponding design brand for the first time.——LED lighting

Luminaries are also beginning to realize the importance of "design". In fact, upgraded consumer demand has gradually become the driving force for many luminaire manufacturers to switch to the "new consumer" market.——LED lighting

"Our product's R & D and design capabilities are no longer under foreigners." Qi Long Group Chairman Yuan Shiqiang proudly said. The company has annual sales of over 1 billion, ranking the first few in ancient town. It does not work as a foundry and focuses on independent design. Currently, it has 4 brands.——LED lighting

Mr. Yuan Shiqiang, chairman of Qilang Group, which has an annual sales of more than 1 billion yuan, emphasizes that he does not work as a contractor but designs on his own. (Fig. Li Ziqi)

Qilang claims to have invested more than 14 million yuan annually in product innovation and R&D. The R&D Department currently has more than 100 people and also cooperates with foreign designers. In 2011, the company and Italian designer Fabil Fornasier collaborated on the "Swan Lamp" by the British Lighting Association was awarded the "Best Fixed Lamp Design Award" and "British Lamp Design Award of the Year". "What we most value is product research and development." Yuan Shiqiang said.——LED lighting

The lantern brand of the ancient town is the Swan lamp designed and developed by itself.

The government has gradually begun to attach importance to the issue of intellectual property rights, and set up a national intellectual property rights declaration shop in Guzhen. A normal patent application can be completed between 7 days and half a month. Even so, plagiarism is serious. "It's useless for you to make a patent. It's different for you to get another hole." Xu Zhenhua said.——LED lighting

"Design innovation, factories can do, but you can design products to sell, this is the key." Jin Shengxi said, "Qi long has the promotion and sales team, there are channels, it can be achieved. But most factories in ancient towns can't do that.——LED lighting

The original design of lamps and lanterns is a long-term process. It takes a lot of money and time to start from mold to material trial and then to final molding. Some lamps with design sense may cost tens of thousands of dollars for light input. Because of the high cost and long life of the mould, it means high risk for the lamp manufacturers. Xu Zhenhua's factory spent less on the mold fee. "Our mold has no technical content, we have a mold fee of up to 20,000 yuan this year."——LED lighting

In contrast, innovation at the front end of the industry may be more meaningful. Most of the lamp companies do the back-end. And the core of the lamp, is the lamp beads, it is a high demand for machinery and equipment and plant, investment is very large, "at least 10 million yuan more. If you make chips of lamp beads, it's even worse. It's normal to pound billions. " Jin Shengxi said.

Jin Shengxi believes that at least in the next few decades, the advantages of the ancient town in the lighting industry will not be replaced. Although lamps and lanterns are also a labor-intensive industry, but its industrial chain is very long, and different from furniture, a lamp needs a variety of accessories, the town has a fairly perfect industrial chain, in this respect has an absolute advantage.——LED lighting

The "Twin Stars" building, consisting of two 25-storey buildings, has become a new symbol of the innovative development of the ancient town. One is the productivity promotion center of the ancient town. It has introduced the Semiconductor Lighting Technology Research Center of Sun Yat-sen University (Guzhen Campus), the Lighting Inspection and Certification Center, the Zhongshan Intellectual Property Rapid Rights Defense Center and the Modern Service Trade Center. Nine public innovation service platforms, and the other one, Qilang Company, is here.——LED lighting

"In the past two years, the ancient town is shuffling, leaving us little opportunity." Li Jie said.

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