Data interpretation: in 2015, big fish eat small continue to perform?

It is increasingly clear that the LED lighting industry is quietly undergoing profound changes, the first stage of the extensive competition gradually to the second stage of capital and technology competition, mainly in the industry increasingly high degree of concentration, low level enterprises gradually withdraw from the market, large enterprises gradually began to dominate the market. We explore the phenomenon and trend of industrial capital flows in 2015 by analyzing the data of merger and acquisition in 2014.

LED chip industry is different, China's LED packaging, LED lighting and LED display industry, a large number of companies, industry concentration is low, intense market competition. 2014 HHI index of China's LED industry, in addition to the chip industry more than 1500, packaging, lighting and display HHI index are below 1000. According to the U.S. Department of justice to the definition of the HHI index, HHI index has more than 1500 belong to the category of oligopoly, while HHI is lower than the competitive category of less than 1000. Thus, China's LED packaging, lighting and display industry market share of each enterprise is still low, the ability to have a significant impact on the industry leading enterprises, the market concentration to be further improved.

Source: Huaqiang North net index

Before this, because the product homogeneity is high and the industry with lower barriers to entry, therefore it is very difficult to achieve the purpose of rapid expansion, through the differentiated development so, mainly to the acquisition of epitaxial growth will become the development trend of the type of industry, have the advantage of capital, technology and resources of the enterprise through the powerful combination of complementary advantages. In strengthening their own competitive strength, but also to further expand market share, to achieve a win-win situation. 2014 M & a boom is evidence of this, according to incomplete statistics in the global LED industry in 2014 the main M & A events have 33, of which foreign 5, the domestic 28. From the amount of mergers and acquisitions, foreign mergers and acquisitions involving 3 billion 826 million yuan of funds, accounting for more than $39%, the domestic M & A cases involving funds of $5 billion 965 million, accounting for more than 61%, reflecting the trend of foreign capital, compared to the domestic focus.

The proportion of LED M & A in China and foreign countries in 2014 (source: China Light Industry Association)

Although the number of foreign mergers and acquisitions and the total amount is less than the domestic, but it hit the LED industry's largest single acquisition transactions - Investindustrial invested 400 million euros acquisition of Italy lighting brand Flos transfer of the equity interest of 80%. In addition to the acquisition, the remaining four mergers and acquisitions involving a relatively small amount of funds ranging from $90 million to $240 million. Generally, the development of overseas LED industry is relatively mature, high-quality resources and channel brand lighting products and other industries have basicallydivided finished, the amount of mergers and acquisitions at the same time, these enterprises will be less intense competition and low profits in the low-end LED package and lamp manufacturing transfer to the relatively low labor costs, China, thus effectively avoid the industry the competition brings pressure on prices, good overseas LED industry created a more stable pattern of competition.

Cases of foreign mergers and acquisitions in 2014 (source: Dongxing Securities Research Institute)

From the domestic M & a situation, the proportion of funds in the acquisition of up to 100 million yuan accounted for up to $1 billion, accounting for the proportion of more than $43% acquisition of at least 4%. A small number of mergers and acquisitions are the phenomenon of China's LED industry and the current situation is consistent, namely China LED packaging and application industry on the number of 1 billion scale enterprises is less, so the lack of enterprise scale is limited by the emergence of large mergers and acquisitions. However, with the continuous improvement of industry concentration, the industry's leading sales and profitability will continue to rise, which is also the future of China's large number of M & A transactions to lay a good foundation.

The distribution of domestic M & A cases in 2014 (source: Dongxing Securities Research Institute)

From the various sectors of the chain of mergers and acquisitions of funds, the total amount of funds involved in the downstream LED lighting and display applications such as total mergers and acquisitions accounted for 82%. This includes audio and shares the same side of the cross industry mergers and acquisitions as well as rectangular lighting and other LED manufacturers to extend the industrial chain downstream. The LED packaging industry mergers and acquisitions scale is relatively low, only 6%.

2014 the domestic industry chain acquisitions funds accounted for (source: Huaqiang North index network)

The chart also reflects this phenomenon, that is, except for certain cutting-edge technologies or patents, horizontal merger LED packaging field will rarely occur, because only horizontal merger will increase the enterprise productivity, and the synergistic effect is poor, will not bring substantial improvement on the future development of enterprises. Similar to the middle reaches of the downstream end of the packaging section of the vertical mergers and acquisitions as well as non LED companies in the field of cross-border mergers and acquisitions in the field of LED terminals will continue to be staged.

Different from the chip and packaging manufacturers, many LED terminal application companies have their own sales channels, these channels are crucial for the upstream enterprises, especially attractive for packaging enterprises competitive. By combining with the master quality channel resources to the application of the enterprise, whether it is business or enterprise cross-border package can sell their products through the channels, to achieve the maximization of the interests coordination effect thus produced by merging the. Therefore, the future is expected to integrate the field of LED applications will continue to be the protagonist of the LED industry.

Xiaobian summary: with the price of LED products to reach the bottom, the profitability of small businesses and the ability to resist risks will face great challenges, large enterprises through technology, production capacity will further control the market. 2014 industry mergers and acquisitions is only the beginning, with the increasingly fierce competition in the industry, the quality of enterprises in the strong combination between the demands of the 2015