Since the second half of last year, international key LED enterprises have announced the sale or spin-off of LED lighting business.
On September 23, 2014, philips group announced to divide the group into two parts, separate the two business of medical care and lighting, and further set up two companies.
Then on October 27, samsung electronics announced to withdraw from all countries and regions except South Korea LED lighting market.
Following philips' announcement that lighting will be spun off from the group, osram, the German LED leader, recently announced that it will spin off or sell its general lighting business and set up an independent company.
In recent years, the global LED lighting market has been growing rapidly, with the penetration rate of LED lighting increased to 33% from 11% in 2012. Why do international key LED companies continuously separate LED lighting business in this environment?
What trends does this portend for the LED lighting industry?
What important inspirations will this bring to the development of domestic LED lighting industry?
Reason for international key LED enterprises to divest lighting business
First, the low profit rate of lighting business has become a development constraint.
LED industry chain is long, from chip, packaging to terminal products, and the terminal products are divided into LED backlight module, LED display and LED lighting, such as color TV and mobile phone.
Most international key LED enterprises have transformed from traditional lighting to LED lighting enterprises, covering the r&d and production of the whole industrial chain. LED lighting is an important part of their business.
But in recent years LED lighting's profit margins have declined as market competition has intensified.
More than 90% of samsung's LED revenue is contributed by LED chips used in panel backlight modules, which has a weak influence on LED lighting market.
Philips has the number one lighting brand and the highest market share in the global lighting industry. However, in recent years, its profit has been hovering below 10%, far lower than its medical business.
Osram's planned spin-off of traditional bulbs, ballasts and LED lights is also unprofitable with the systems department.
Therefore, under the pressure of further development and investors, these companies have separated the low-profit lighting business.
Second, the rise of Chinese LED lighting enterprises, market competition pressure.
China has the largest LED lighting production and application market in the world. Due to the advantages of low cost and high efficiency, a large number of Chinese enterprises can launch new products more quickly, and the price is closer to ordinary consumers and exported to various regions of the world.
With the intensifying competition in the global LED lighting industry, international key LED companies have cut prices to grab market share.
Philips LED bulbs fell from $30 to $10-12 in 2014, and osram launched lighting products under $10.
At the same time, large companies are affected by overstaffing and low efficiency, with higher production costs and gradually losing market advantages.
Therefore, with the rise of LED lighting enterprises in China, these enterprises have been stripping off their lighting businesses to meet the market challenges.
Third, main business transformation, focusing on the high-end part of the industrial chain.
In the process of developing development strategies, international enterprises often emphasize the business focus on core competence and resources focus on core business, so as to improve their competitive advantages and core competitiveness.
Samsung electronics stopped its LED lighting business outside South Korea in order to achieve a more effective and focused operation strategy;
From its earliest exit from the chip manufacturing and television businesses to its current sale of the lighting business, philips has focused more resources on its healthcare business, which has a higher technology threshold and greater profitability.
Osram's move to spin off its general lighting business also aims to focus on high-margin markets such as automotive lighting, smart lighting and solutions.
Therefore, these companies' moves to spin off the lighting business hope to gather more resources in the high-end part of the industrial chain in the process of business transformation.
Reflect three trends of LED lighting development
One is that China will become an important market for LED lighting.
In 2014, the sales volume of lighting products in China was 520 billion yuan, up 10.6% year on year, of which the sales volume of LED lighting products was 95 billion yuan, up 43.9% year on year, and the market penetration rate increased year on year.
LED lighting exports were $9 billion, up 50 percent year-on-year, and sales in emerging sectors such as the United States, Europe and Russia have exploded.
With the advantage of Chinese manufacturing, the global manufacturing base of LED lighting products will be transferred to China in the future, and the output value of China's LED lighting will increase by more than 50% in 2015.
LED lighting will take the lead in China's LED application market with its penetration rate rising to 25 per cent as plans to phase out incandescent bulbs continue.
Second, LED lighting industry merger and reorganization intensified.
With the intensification of competition in the LED industrial chain, enterprises will face greater competition pressure and survival pressure in the future. The integration and merger between LED enterprises are more frequent, the strategic intention is more diversified, and the integration direction is constantly adjusted, and the superior resources are further concentrated in the industry leader.
In 2015, the overall m&a amount of LED industry is expected to exceed 20 billion, and the m&a cases with a scale of more than 500 million yuan will continue to increase.
Especially in the field of LED lighting, with the performance improvement and further cost reduction of lighting products, the homogenization of products will aggravate the competition between enterprises.
In order to build brand awareness and seize sales channels, lighting enterprises will usher in a critical period of integration.
Third, lighting products to functional intelligent development.
As international key enterprises divest the traditional lighting business, they are looking for a niche.
In order to move to the high-end of the value chain, key enterprises will further strengthen the innovation and research and development of auto lighting, plant lighting, intelligent lighting and other subdivisions, and provide alternative lighting solutions for different application environments, so that the application of lighting products presents a diversified and intelligent development trend.
Enlightenment to Chinese LED lighting enterprises
First, investment in LED lighting market return to reason.
After experiencing the investment trough in 2012, China's LED lighting industry began to show a recovery trend in 2013.
As LED factories shed their lighting businesses, the low-margin, low-value parts of the industrial chain will continue to shift to China.
The relatively low threshold and low technology characteristics of LED lighting in the industrial chain have attracted a number of investors. Existing LED lighting enterprises will further invest to expand the scale in order to expand the cost advantage.
In order to avoid the low-level and repetitive construction of domestic enterprises, LED application market needs should be oriented to develop marketable products and develop new sales channels.
According to the different characteristics of each link in the LED industrial chain, the long-term development strategy is formulated according to its own strength, and rational investment is considered comprehensively.
Second, focus on product segmentation and quality improvement.
LED lighting business to the domestic shift, signaling increased domestic competition.
Domestic enterprises should pay attention to mining market segment and avoid homogeneous competition.
To expand the indoor and outdoor LED lighting market, enterprises 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 LED lighting products for different application demands.
Enterprises should strengthen technological upgrading, promote the transformation of medium and low-end production capacity to medium and high-end production capacity, and elaborate labor division and cooperation, so as to avoid vicious competition on low prices of the same products.
On the other hand, enterprises should pay attention to improving product quality. In Europe and the United States, LED products have strict requirements on performance indicators. By improving product quality, enterprises can expand the export scale.
Enterprises should check the safety, energy saving and environmental protection indexes of LED light source, lamps and accessories and other lighting links regularly to strengthen their management.
Third, we should seize the opportunity to reserve core intellectual property rights.
Through the sale or spin-off of the lighting business, international large factories provide opportunities for the international m&a of domestic enterprises. During the m&a process, Chinese enterprises can obtain abundant LED patent technology.
Previously acquired by philips lighting business in China, the company has obtained more than 600 patents related to LED production and automobile lighting, providing an important foundation for domestic enterprises to strengthen their intellectual property reserves and strengthen technology research and development.
Domestic enterprises should seize the opportunity to develop innovation-driven technology, accumulate their own core intellectual property rights, and at the same time use international acquisitions and mergers and reorganizations to strengthen external resources for our use in mergers and acquisitions, so as to enhance the overall strength of the domestic LED industry.