LED display industry reshuffle accelerate business management thinking breakthrough

In July, Shenzhen billion light burst was owed by the number of suppliers must payment, capital chain was forced to close in August, Shenzhen; ten party suppliers due to malicious fraud photoelectric eighty million yuan, and 220 employees owed two months wages, go bust; in September, Shenzhen light due to poor management of Barco company, mortgaged. LED display industry after ten years of development, has gradually entered a large-scale reshuffle. As early as 2011, the industry reshuffle has begun, junduoli, grand display Boren enterprises have failed to withdraw from the market; at the end of last year, a large field of vision, vision photoelectric, photoelectric hibo photoelectricity failures Jiahao, LED display industry reshuffle has not stopped.

Bankruptcy continues, mergers and acquisitions tide is coming

Figure 1 LED display industry mergers and acquisitions case

Source: LEDinside finishing

In 2013 7-9 month, LED display industry has 3 merger cases, respectively Jiangmen lentone Kohand acquired 51% equity interest in science and technology, the acquisition of Furi Electronics Mai Rui photoelectric 93% stake in the Hong Kong listed companies to buy three liters of Shenzhen seamless green tech 51% stake. Bad market competition leads to display market sea, declining profitability of enterprises; some enterprises to ensure profitability to the use of inferior materials, so that product quality problems, the payment to income, accounts receivable increased; the growth rate of the market demand and capacity growth, resulting in rising inventories of enterprises. Decline in profitability, accounts receivable, inventory increases lead to cash flow can not be guaranteed, is the main reason for mergers and acquisitions.

Table 1, the recent operation of the United States in recent years (100 million)

Data sources: public information, LEDinside finishing

Joint Teng Technology in 2010 revenues of 45 million 480 thousand yuan, operating profit of $2 million 140 thousand in revenue in 2011, an increase of 129%, but operating profit of only $2 million 240 thousand, an increase of only 5%, gross profit margin fell by 10 percentage points. 2012, directly into a loss state, the net interest rate of -0.16 billion, in 2013 1-5 months, is still in a state of loss.

Table 2, Mai Rui photoelectric financial situation in recent years (100 million)

Data sources: public information, LEDinside finishing

In the first half of 2013, revenues of 177 million, accounts receivable was $66 million, inventory of $153 million. Inventory is too high, take up a lot of operating cash. And LED display prices decline, performance continues to improve, inventory is too high, the increased risk of impairment. In addition, due to excessive accounts receivable increased the company's cash flow situation.

Carefully observed since 2011, the collapse of the LED display business, the basic reason for the failure of most of the cash flow is broken. The brutal market situation led to the small and medium enterprises have to take cheap red, or abnormal operation charge impulse means to seize the market, which will make the enterprise operational risk greatly increased.

Two stage differentiation fade, improve industry concentration

Table 3, 1H2013 main business LED display business revenue gross margin

Data sources: public information, LEDinside finishing

In the first half, small and medium enterprises continue to emerge closures, mergers and acquisitions, and the performance of listed companies is growing. Chau Ming Technology in the first half revenue growth of nearly 3, alto electronics gross margin as high as 54.8%. According to the LEDinside survey, LED display device packaging manufacturers to manufacturers as the main customers, such as the country star power, crystal photoelectric, blue photoelectric performance in 2013 is also growing, crystal photoelectric production capacity has reached 1300KK/, and still continue to expand production.

In fact, from the upstream LED display chip main supplier, HC semitek, Silan azure performance are different degrees of decline, the LED display market demand while the total output value of growth, but affected by the decline in prices, even a small increase in the stagnant state. The big manufacturers in this market structure, while maintaining high margin, performance is still maintained a high growth trend, enough to explain the LED display industry concentration in the upgrade.

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