Since the second half of last year, international key LED enterprises have announced the sale or spin-off of LED lighting business.
Philips announced it was splitting the group in two, separating its healthcare and lighting businesses and building two more.
Samsung electronics announced to withdraw from all countries and regions except South Korea LED lighting market.
Following philips' announcement that lighting would be spun off from the group, osram, the German LED leader, has also 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. The penetration rate of LED lighting has increased from 11% in 2012 to 33%. Why do internationally famous LED companies continuously separate LED lighting business?
What trends does this portend for the LED lighting industry?
What important inspirations will this bring to the development of domestic LED lighting industry?
Internationally renowned LED enterprises shed lighting business
With the intensification of market competition, LED lighting profit margin declined, leading international LED companies are stripping off their lighting business.
Internationally renowned LED enterprises shed lighting business, mainly for three reasons.
First, the low profit rate of lighting business has become a development constraint.
The LED industry chain is long, from chip, packaging to terminal products, which are divided into color TV, mobile phone and other LED backlight module, LED display and LED lighting.
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 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 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 to $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.
LED lighting development presents three trends
LED lighting product sector merger and reorganization intensified, enterprises will usher in a critical period of integration.
The phenomenon of the international famous LED enterprise stripping off its lighting business reflects three trends of LED lighting development.
One is that China will become an important market for LED lighting.
In 2014, the sales volume of LED lighting products in China was 95 billion yuan, up 43.9% year-on-year.
LED lighting exports were $9 billion, up 50% from a year earlier, and emerging markets were exploding.
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, the integration direction will be constantly adjusted, and the superior resources will be further concentrated in the industry leader.
In 2015, the overall m&a amount of LED industry is expected to exceed 20 billion yuan, 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.
International key enterprises divest the traditional lighting business and look for specific areas.
In order to move to the high-end of the value chain, innovative research and development in auto lighting, plant lighting, intelligent lighting and other subdivisions will be further strengthened to provide alternative lighting solutions for different application environments, so that the application of lighting products will present a diversified and intelligent development trend.
Enlightenment to Chinese LED lighting enterprises
According to the different characteristics of LED industrial chain, make long-term strategy according to its own strength, take overall consideration and make rational investment.
The phenomenon of the international famous LED enterprise stripping off its lighting business brings three inspirations to China's LED lighting enterprises:
First, investment in LED lighting market return to reason.
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 capacity to medium - and high-end capacity, and refine labor division and cooperation to avoid vicious competition at low prices.
At the same time, 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 regularly check the indicators of safety, energy conservation and environmental protection of the products in each link of production and strengthen their own management.
Third, we should seize the opportunity to reserve core intellectual property rights.
By selling or splitting off the lighting business, international large factories provide opportunities for the international m&a of domestic enterprises. In the process of m&a, domestic enterprises can obtain abundant LED patent technology.
Previously, Chinese companies acquired philips lighting business and obtained more than 600 patents related to LED production and automobile lighting, providing an important foundation for domestic companies 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.