China's LED lighting market is progressing toward maturity

People usually discuss the LED industry, speaking from the upstream to the downstream. However, with the maturation of the LED industry, the old logic that determines the possibility of application in the downstream market by the technological advancement of the upstream gradually allows the downstream demand fluctuations to fluctuate the new logic of the upstream market. Therefore, this article decides to sort out some of the phenomena that occurred in this industry in half a year in 2015 in order of upstream and downstream. In order to discuss this relatively complicated industry, we have better coherence and are more consistent with the internal logic of this industry. .

China LED lighting products stalled

Now that the second quarter is almost over, the difference from the past two years is that we have not waited for an explosive growth. On the contrary, whether it is from the export data or the monthly data disclosed by the LED companies in Taiwan, there is a relatively large decline compared with the same period of last year. Especially for the export of LED lighting products, this indicator has experienced the first year-on-year decline in several years in March 2015. The rate of decline has reached 16%. The April data has improved slightly, but it has not been a good place to go.

Is this an accidental phenomenon? I am afraid that this is not the case. In fact, observing the year-on-year figures for a longer period of time, in 2013, with the rapid outbreak of the LED industry, exports were also quite booming, and the year-on-year growth has been in an upward trend. Since the second half of 2014, the year-on-year growth rate has been declining. The export performance in the first and second quarter of this year is just a continuation of this trend. It remains to be seen and confirmed when it will be able to turn around.

What is the cause of this decline?

External factors: insufficient demand

External factor one: The renminbi has appreciated sharply for major foreign currencies within one year, the export pressure has increased dramatically, and there is insufficient external demand.

In the past year, the exchange rate between the renminbi and the US dollar has remained at a fairly stable level. It is only concerned that the exchange rate between the US dollar and the renminbi does not seem to have felt the trend of RMB appreciation. However, the past year has been a period in which the dollar has been super-strength globally. In fact, because the dollar’s ​​appreciation against the currencies of other major economies is equivalent to the renminbi’s sharp appreciation against other major foreign currencies, the In markets other than the dollar zone, Chinese companies’ exports have encountered severe price pressures.

There are two layers of meaning: On the one hand, the strong renminbi will force LED lighting export companies to no longer rely too heavily on cost advantages as they did in international competition. On the other hand, the overly strong renminbi has caused China's manufacturing industries, including the LED lighting industry, to face unprecedented pressure and challenges. A modest RMB devaluation is imminent.

External factor 2: Due to the declining real estate market and fiscal contraction, domestic demand is weak

Under the fiscal shrinkage policy of the Chinese government this time, the expenditure on public lighting has been greatly reduced compared with the past. In the past, the real estate market, which played a key role in driving indoor lighting, also seemed to have entered a turning point in growth. According to the data from the National Bureau of Statistics, although the real estate construction area in the Chinese market continues to grow, the year-on-year growth rate continues to decline, and the potential indoor lighting market is greatly limited in the future. What's more obvious is the sales area of ​​commercial housing, the year-on-year growth rate has been maintained at a negative value, which also has a negative impact on the demand for home lighting.

Internal factors: The LED lighting industry is entering a stage of maturation

It is these two external factors that have led to the weak demand. This reminds people of the industry's 2012 situation. In 2012, the LED industry also faced an unprecedented crisis. A large number of enterprises have insufficient capacity utilization, and the industry is in a serious oversupply situation. Several LED companies failed to survive. However, by the second quarter of 2013, sudden bursts of demand for LED lighting led to a major reversal of the industry. Will it be the same again this time?

By the second half of 2013, LED lighting to the typhoon has been confirmed, and that is to say, LED bulbs will be used to replace the domestic lighting market.

The replacement of LED bulbs that lasted for 2 years allowed Rieter, M. Linsen, and Foshan Lighting to stand out in the LED replacement lighting market.

However, this time, it may not be the same.

The "gap" phenomenon was created by Mr. Jeffrey Moore's book "The Crossing Gap". In the book, Moore describes a phenomenon in the science and technology industry: Unlike the traditional industrial life cycle, there is a “gap” phenomenon in the technology industry. The existence of the gap derives from the intrinsic character of the crowd that drives the needs of different stages of the industry's life cycle - between those who bravely try new things in the second phase and the pragmatists in the third phase.

When you dare to taste a new product in one product, you are willing to actively try it out. To satisfy its freshness, pragmatists must wait for the new one to spend some time, confirm that it is the right direction, and take action at the right time. As a result, the market’s demand has broken down between the two stages of the crowd. The visionary who has already occupied a minority in the crowd has already become a user and will not be purchased again, while the pragmatists are still waiting to see it. .

When pragmatists finally agree with the product and begin to purchase and use it, the actions of the pragmatists who occupy the vast majority of the population will allow the product to greet explosive style as if it were sitting in the typhoon. growing up. Finally, when most pragmatists and conservatives begin to adopt, market penetration has slowly been saturated and the industry will gradually decline.

In fact, this phenomenon is also described in the Chinese Book of Changes. Zhou Yi said:

The first nine, Qianlong, do not use.

In the early stage of the market, the demanders in the market are mainly enthusiasts of new technologies, not the mainstream public.

In September 1992, see the dragon in the field and see the adults.

The niche market began to appear. Some foresighted consumers who are willing to try new things began to demand. At this time, companies should start to gradually increase investment and find good partners.

In September 3rd, the gentleman did his work all day long.

At this stage, every day we should work harder, serve this niche market, hone our own team, and accumulate experience in the mass market.

Ninety-four, or leap in Yuan, innocent.

This stage is the gap. The real dragon relies on the abyss to recharge, while other non-dragons and pseudo-dragons will be drowned. Really promising markets and enterprises will survive this time without awkwardness.

In the Ninth Five-Year Plan, Feilong was in the air and saw the adults.

This time is the stage of Cang Long's going to sea. The mass consumption power of the mass market has given unprecedented opportunities and development to products and companies that have gained recognition in niche markets.

On the 9th, the dragon, regret

The most important word at this stage is repentance. If the flight is too high, the market has already undergone a change. The existing market is already saturated, and we do not know whether or not to withdraw. We have used our resources to the extreme and we have overdrawn resources. With great effort to compete, in the end it is hard to avoid a regret word.

From this point of view, the wisdom of the East and the West, and the internal logic, have similarities. In fact, no matter whether it is a business operation or an investment, the general rules are not to be blinded at the budding stage. If you see the dragon in the field, you will be prepared to wait until you have a gold pit. You have the patience and even the confidence to raise. The most important thing is that Grasping the dragon at this stage of the day, in the language of investment, it is grasping the Lord's ascent. What is more important is that at the high point, we must know how to stop, and leave the market in a timely manner.

In contrast, if the LED lighting industry is an early market before 2012 and fell into the gap in 2012, it is no doubt that Mullison, Rieter, and Foshan Lighting have seized the main rise of this industry in 2013, thus achieving smooth progress. The leapfrogging and transformation of LED lighting companies, and quickly to do large-scale. The next question is, what stage is the industry now in 2015? According to this exhibition, the Philips, Osram, and GE’s three major international lighting giants were absent. After contacting Philips and Osram’s intensive dismantling company, the sale of shares would be a sign of regret. It is worth our continued observation.

On the other hand, in his book, Mike Port put forward nine characteristics of industry maturity. The LED lighting industry is quite consistent with most of these nine characteristics, and we have every reason to conclude that the life cycle of the industry. From a point of view, the LED lighting industry is transforming from a new growth industry into a semi-mature industry with a relatively slow growth rate.

Companies that compete in such a semi-mature industry have had to resort to deadly weapons of price warfare. In recent days, Mu Linsen, Foshan Lighting, Teyou Shi have lowered the T8 lamp of 1.2 meters to the price range of less than 10 yuan, and the price of the bulb has already fallen to the bottomless limit. The fall in volume or price seems to have become a regular strategy for the industry to maintain its operating income for a long period of time now and in the future.

As a result, there has been considerable caution about the growth of the LED lighting industry in the coming years, unless we have enough evidence to confirm that the industry can get out of the current competitive model, or that there is room for new industry growth. application.