Expansion of LED companies can not "because small not"

According to media reports, a few days ago, Cao Xuehai, an enterprise development strategy expert and senior planner, said in a survey of a large-scale state-owned company that enterprises should do more small tasks, do fewer tasks, or even refrain from major events.

Cao Xuehai said that the so-called trivial matter is to optimize every R&D, production, and marketing node to reduce costs and increase efficiency. In fact, no matter which industry, as long as it can improve efficiency, it is an important part of the transformation of the economic growth model. In the United States, for example, the United States found that due to the weather, materials and other reasons, the loss of power consumption of the cable caused 7%, so the relevant companies to carry out energy-saving research and development, to avoid this 7% loss, so that profits increase by 7%. Another example is that in view of the high cost of German logistics companies, they have improved and improved the relevant links. As a result, costs have dropped by 1%, but overall profits have increased by 24%.

From the results, this small matter is not small, and it cannot be because of smallness.

The so-called major event is to expand the scale of production and to be the industry leader with no regard for excess product and market saturation. For example, the photovoltaic industry and the LED industry are experiencing "winter". Photovoltaic products are subject to overcapacity and slowdown in the market, and their prices have fallen sharply. In 2011, the prices of products in all segments of the PV industry chain fell by more than 50%. From January to June 2012, the price of polysilicon had dropped from US$30.5/kg to US$23.6/kg, a decrease of 22.6%. The price of battery modules also fell from 0.951 U.S. dollars per watt in early January to 0.82 U.S. dollars per watt at the end of June, a decrease of 13.8 percent. Polysilicon production, the current domestic production costs of polysilicon companies are 33 US dollars -40 US dollars / kg, but from the above you can see that the average price of polysilicon has been lower than the cost of domestic enterprises, 80% of polysilicon companies are in production or semi-discontinued state. In the first quarter of 2012, most of the component companies were in a net loss. The operating pressure was still very high, and the second quarter saw a slight improvement. However, the overall situation was still not out of the predicament. According to customs data, the average polysilicon price imported from the United States in May 2012 was US$22/kg. According to the analysis of U.S. listed companies' financial reports, the production cost of U.S. polysilicon enterprises is above 23 U.S. dollars per kilogram, and U.S. polysilicon spot prices have been significantly lower than their production costs. China’s polysilicon companies have stopped production or have stopped production for 80% of the US’s low-price competition strategy. The polysilicon plant has been suspending production for more than one year, and the cost of restarting is high, and it may even be completely closed down.

Let me talk about the LED industry. The phenomenon of LED industry eager for quick success, excess capacity, and vicious competition are common occurrences. All kinds of companies have mixed forces. Everyone is adhering to it, even if it is at a loss. From the perspective of listed companies, as of the third quarter of this year, nearly 70% of LED companies experienced a drop in net profit. Wei Wei shares listed in May this year, the three quarterly net profit fell by more than 90%, was issued by the Securities and Exchange Commission issued a warning letter.

However, under such market conditions, the LED industry, which has been in the doldrums for a long time in recent days, has reverted to being the capital's favorite. Firstly, Xishan Coal and Electric Co., Ltd., which had no relation with LED, announced that it would enter the LED industry. Then Sunlight will change the “Micro mercury environmental protection and energy-saving lamp industrialization project” part of the private placement and investment project to “The annual output of 20 million (sets) of LED lighting product industry. Project; followed by Furi Electronics also said that it will raise funds to focus on the development of the LED industry.

The LED industry's enterprises are in a converse trend to expand production, and there are unrelated companies entering the LED industry. This will inevitably lead to further aggravation of excess production capacity and further deterioration of market competition. Excessive investment makes the LED industry oversupply, and many companies are in the lower middle and lower technical barriers. In the future, LED companies will face cruelty and survival of the fittest. Only a few companies will gradually grow, and more companies will face the fate of being eliminated.

From this perspective, blindly following the trend and expanding production capacity can not only make the company bigger, but it can be smaller and smaller until it is eliminated. Therefore, it cannot be done because of bigness.

Cao Xuehai, for example, said that on a certain day in June this year, I heard that a daily-use washing company in Jiangsu, which I am familiar with, has to launch another 100,000 tons of detergent production line every year. I was shocked! Because I know the status quo of this company: its products are mainly sold in the rural areas around the city where it is located, plus foreign exports, with an annual sales of about one billion yuan. Exports have fallen sharply this year and sales have plummeted by 60%! Under such circumstances, if it is launched again, an annual production capacity of 100,000 tons of detergent powder production line will inevitably go to bank loans, resulting in increased product costs due to interest payments; in addition to the fact that products cannot be sold, they will inevitably increase inventory, and there will be a break in the capital chain. Situation, the consequences can be disastrous! I immediately blocked the company’s production line in the form of SMS, and shortly afterwards went to the company to discuss the company. It is recommended that the company’s CEOs build the existing production line into an R&D base, increase the R&D intensity of new products, increase the added value of products, and focus on doing a good job at the same time. Channel construction and brand promotion work. At present, we will vigorously do a good job in direct sales of distributors for product sales, provide quality services for dealers, and do a good job in collecting payments. In the near future, new products will come out and when the brand is launched, we can use the OEM form to cooperate with the industry, which will also resolve fierce competition.

Cao Xuehai said that in fact, the ultimate goal of transformation and upgrading is to increase efficiency. It does not mean replacing all the original manufacturing industries with strategic emerging industries. The transformation and upgrading of enterprises must be scientific, that is, scientific planning, scientific management, scientific research and development, scientific manufacturing and scientific management. The total product category is not much, the scale is not the size, as long as it can improve efficiency, increase value-added, and improve profitability, this is "real growth."

Cao Xuehai Introduction: The enterprise development strategy expert and planner. Director of the Audience Research Association of China Broadcasting and Television Society, member of China Planning Association, senior planner, senior financial reporter. From 1996 to 1998, he studied at the Graduate School of the Chinese Academy of Social Sciences. Since 1992, he has served as the general manager of the Radio and Television Development Corporation, the vice president of the state-level large-scale enterprise, and the director of brand operations and corporate culture. Currently engaged in business and personal development strategic positioning and brand communication strategy consulting business.