Why is China's LED lighting industry oligarchs are "EMS"?

Author: LEDinside senior analyst Wang Fei

In March 19th LEDinside Shanghai analysis meeting, I finished the China future LED lighting industry is likely to EMS as a pattern of oligarchs, followed by many people asked why not XXX, I want to tidy up my logic, also welcomed the attention of our friends give more discussion.

Why oligarchs?

First of all, I would like to go back to the point, why is the oligopoly pattern? The traditional lighting industry even more mature stage, the market presents several brands of independent pattern, but overall, the concentration is still very low, still failed to enter into the oligopoly stage, can only say that each brand has its own relatively dominant market:

One of the restrictions from the traditional lighting industry in the manufacturing of significant economies of scale, after more than a certain size, the marginal cost of production and not significantly decreased, and the management of the scale of economy began to highlight. According to my observation, the boundary is probably between 1 and 500 million RMB. More than 500 million of the size of the output value, there is still a marginal cost of decline, even if there is a very good way to manage the lighting manufacturers. Including PHILPS, OSRAM these international lighting brands, to see if their OEM chain, some of eastern and southern Europe to the nearest factory production, but even in Asian foundries, is quite scattered, more than three above the scale, has not entirely supply chain security considerations, largely also from the traditional lighting products production on the scale of economy.

That the above-mentioned enterprises can do 20 ~ 4 billion scale? I think they are the main source of scale economy has not only from manufacturing, but the economies of scale in the brand and sales channels, can not stand out enough can be divided, special strong branding and channel construction costs. At that time, the rapid rise of NVC, many people do not understand, NVC relies heavily on manufacturing foundries, why can do so much so soon. This is Wu Changjiang's forte, lost money hit in the advertising and sales channels, rushed up to look back, in fact, every single product advertising costs and not much amortization. If Wu Changjiang had to manufacturing thinking, I am afraid on Zhongshan Ancient Town today NVC but is also a front shop hanging green lighting shop signs.

Look at the era of LED lighting manufacturing industry, upstream from the whole industry chain of the compound semiconductor crystal growth, growth, component packaging, is not dependent on high R & D investment, high fixed assets investment industry, characteristic of this kind of industry is the economic benefits of the scale is very obvious, in theory, is infinite scale economy. Look at the semiconductor industry, the scale is almost equal to competitiveness, usually only the industry in order to make money, second are barely make money, to the third of the fourth are waiting for the fate of the whole. LED lighting era of the lighting industry, the inevitable semiconductor. If the introduction of a large number of light source and lamp manufacturing automation, then the future competitiveness of the source will be more dependent on the scale of production. Under the dual economies of scale of the brand and the manufacturing, the industrial structure dominated by large enterprises will soon move towards oligopoly.

Why is "EMS"?

Why is the first ETI (Elec-Tech), why is the "U" strategy?

When starting LED field Elec-Tech not to know the depth of things, the capital market fanaticism pursued, and when enough to pay tuition fees when really want to do something, the market is still considered to be Wang Donglei in the flicker. It's like a child said to hit their home glass, a bunch of people over the crowd, but also on the stone slingshot. Look at the child's own glass a piece of light is also a good cheer.

When the end of the crowd and the child was found after the excitement only a glass dregs, and scattered in panic. The child also found herself wrong when you want to sweep up the broken glass paste on the window, but could not erase a bad impression of a child. For Elec-Tech I believe one of the predecessors, said the beginning of the heart on, meaning that LED chip project can do, to see the original heart, if it is to do business, then the government subsidy is the icing on the cake, if it is to get subsidies, subsidies so that one is inside the trap but regardless of full fat and attractive. As for the heart of the chairman of the board of directors, the world I am afraid that only he knows, and only he can prove to the world. We as a spectator and witness to the changes in the industry, is more likely to look forward to many years later, to tell a successful case of inspirational cross-border, rather than a blind transition to the lessons of failure of investment.

Of course, the above is not enough to become an episode of ETI reasons, the advantage of ETI is that the best line of the NVC entrance into the Department of BDO formed ETI-NVC combination. BDO broaden downstream of self-help, precisely in line with the Wu Changjiang re entered the vision of NVC, can think of this game and rapid implementation, I am afraid that only Wang Donglei, into the marrow of the smile curve that made him a crowd of more than aware of the three letters NVC value, while Hong Kong stocks undervalued and the value of NVC infighting, provides an excellent opportunity for the. The smile curve combination is the BDO system "U" strategy.

Why this combination? This will