Excessive enterprises participate in the competition, making the LED industry market profits continue to be diluted, and mergers and acquisitions occur frequently. As the performance of LEDs in lighting has gradually dimmed, capital has begun to shift to the higher value-added upstream in the LED industry. As the industry "blue ocean", the industry estimates that the domestic market demand for deep ultraviolet LED (important application value in the fields of sterilization, medical treatment, biochemical detection, high-density information storage and secure communication) is as high as 15 billion yuan.
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On October 21, Liang Xudong, chairman of Yuanrong Technology, told reporters that the company will complete the control of Qingdao Jiesheng Electric Co., Ltd. (hereinafter referred to as Jiesheng Electric). According to the previous announcement, Yuanrong Technology intends to acquire 85.61% of the shares of Jiesheng Electric, with a total purchase price of 109 million yuan. The incentive for this acquisition stems from Jason Electric's nearly 100% monopoly on domestic deep-UV LEDs.
The LED industry is highly competitive
Although low-price competition is making the industry go to meager profit, as a major strategic emerging industry, the temptation of LED to capital and the resulting mergers and acquisitions are becoming a trend.
On October 16, Yuanrong Technology stated in the announcement that it intends to acquire 85.61% equity of Jiesheng Electric by means of non-public offering of shares and payment of cash.
According to the data, Yuanrong Technology, which was established at the end of 2010, is an important LED upstream product supplier in the industry with an annual output value of 400 million yuan. However, the target of the acquisition is not a leisurely generation. Before the completion of the holding of the company, IFC (International Finance Corporation), a member of the World Bank [microblogging] group, is the largest shareholder of Jason Electric.
According to Zhang Guohua, chairman and general manager of Jiesheng Electric, "The most important thing for a company to develop is capital and market. If you have money, you can do things. This is also a key point for Jiesheng and the circle."
Liang Xudong told reporters that the move will expand and improve the company's business layout, diversify its business model, further leverage its business synergies, and enhance its profitability and risk resistance.
In fact, the industry believes that after more than 10 years of rapid development, China's LED industry competition has become quite fierce, and low-cost competition caused by capacity expansion is gradually diluting industry profits.
According to the National Bureau of Statistics, in the first half of 2015, there were 579 cumulative loss-making enterprises in the national LED lighting industry, with a loss of 22.18%, which was 8.6 percentage points higher than the national light industry industry. According to the LEDinside statistics of the city's regulatory agencies, the average unit price of LEDs has fallen by 30% to 40% this year. The output value of the industry has only increased by 2% to US$14.52 billion. The merger and acquisition tide will continue to be integrated next year.
According to relevant industry organizations, from the beginning of this year, there have been nearly 30 mergers and acquisitions in the LED industry. The total M&A amount has exceeded 28 billion yuan and covers all aspects of the LED industry chain.
The integration of mergers and acquisitions will continue
In February 2015, relevant industry organizations predicted that the elimination trend of M&A in China's chip industry is obvious. The top 5 companies in the LED chip industry will account for more than 70% in the next three years.
Today, capacity issues bring industry adjustments. According to Taiwan LED manufacturer news, the proportion of global LED chip supply exceeding demand will reach 22% in 2015, mainly due to the continuous expansion of production capacity of mainland LED epitaxial wafers and chip manufacturers.
As the top five companies in the industry, Yuanrong Technology is no stranger to M&A. In the past two years, in addition to Yuanrong Technology's acquisition of Jiangxi Ruineng Technology, mainland LED chip companies almost never found a case of mergers and acquisitions.
It is worth noting that Liang Xudong does not recognize the scale effect that M&A may have. He believes that "scale does not necessarily produce benefits. I personally value added value, not through price cuts."
Li Shizhen, a professor at the Hong Kong University of Science and Technology, said, "We can make the final pricing of LED products, for example, 10 yuan, but because of raw materials and equipment short-board, 9 yuan is earned by the United States, Germany, Japan, China can only earn To 1 yuan."
What makes Liang Xudong and his team most value is that Jason Electric has the unique manufacturing technology of GaN-MOVCD (deep ultraviolet growth equipment) and deep ultraviolet epitaxial chip production technology.
The reporter noted that compared with the "Red Sea" in the LED blue-green market, the deep-UV LED market is still a "blue sea." According to research reports, the total demand for deep ultraviolet LED chips in the domestic market is as high as 15 billion yuan.
In Zibo's view, in 2013, the global market for UV chips was around US$800 million. If the market chain is enlarged, the market size will be expanded tenfold, and the application market for UV chips will be more than US$8 billion. .
Liang Xudong expects that the deep-UV LED market will usher in explosive growth in the next five years. However, as a corporate manager, Liang Xudong is more concerned about the increase in the added value of products.
Zibo believes that for the LED market, the market and customers need to cultivate at the same time. However, from a business perspective, the development and extension of core technologies will increase the added value of the entire product.
However, mergers and acquisitions within the industry seem to be inevitable before value-added increases. According to research data, the output value of LED epitaxial chips will reach 14.8 billion yuan in 2015, and the growth will slow down.
In the eyes of many insiders, in the case of meager profit, the entire industry of LED must borrow capital power to accelerate the integration of the industry, accelerate the survival of the fittest between enterprises, and form a LED enterprise group with superior scale and strength.
CSC Securities believes that due to the large capital investment required for expansion, many small plants around the world have low capacity utilization rate, poor profitability, and no capacity to expand production. They will gradually be eliminated by the market, and the market will further concentrate on leading enterprises.
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