LED industry "chain debt" crisis emerged overcapacity accelerated

The news that a medium-sized LED business owner in Shenzhen has recently “running the road” has once again attracted the attention of the industry. In fact, last year there was an incident in Shenzhen where more than one LED business owner “running the road”.

Why does the LED industry frequently have a boss "running the road" incident? According to the survey, in the LED industry, the low-end technology of SMEs, fierce competition and narrow financing channels, the phenomenon of entanglement in “chain debts” between production enterprises, suppliers and customers is more common, and it is a fragile capital chain for enterprises. Lay hidden.

The collapse of SMEs is becoming more common
According to media reports, Shenzhen Vision Light Electronics Co., Ltd. caused the company to close down due to the problem of capital chain, and the majority shareholder Ji Yi has disappeared. At present, Vision Optoelectronics' wage arrears amount to more than 20,000 yuan, the project owes more than 380,000 yuan, and the bank's arrears may reach tens of millions of yuan.

"This is definitely not the last one. There will be more companies facing bankruptcy in the future." Peng Guishen, who had worked at Vision Optoelectronics, told reporters on July 5 that when he left the company in 2010, the development of Vision Optoelectronics did not appear too. Big problem. At present, the entry threshold of the LED industry is too low, and enterprises will naturally have many in and out, resulting in overcapacity in the low-end of the industrial chain, and the market competition is very fierce.

Insiders pointed out that LED is a typical labor-intensive manufacturing industry, and many companies can occupy a place in the market by assembling LED components even if they don't understand technology. "Many companies are now concentrated in the low-end market, and there are more and more LED products with less weight. About 90% of the companies are fighting price wars." Lin Sheng, a senior practitioner in the LED industry, told reporters.

Excessive production capacity has triggered a vicious price war between enterprises, which has caused the prices of downstream enterprises in the LED industry to continue to fall, and profits have naturally been diluted. At present, the gross profit margin of the LED industry is only around 20%, while the net profit is less than 5%.

From this point of view, Vision Optoelectronics seems to be blocked by the road of sales. However, the company’s chief financial officer has said that the company’s difficulties in lending have made it difficult for the company to continue. "The collapse of small and medium-sized enterprises in the LED industry is becoming more and more common, and profits are getting thinner and thinner. Many people have been unable to maintain their debts." Zhang, a boss who has been in the LED industry for more than a decade, lamented, "In fact, the original "linked debts" "The spread has buried hidden dangers."

"Linked debt" dilemma emerges
According to industry sources, there is a widespread "linkage" problem in the LED industry. Mr. Lin told reporters that many companies cooperate with suppliers and rely on credit to ensure the arrival of corporate funds.

According to the general rules in the industry, many people choose to write off to upstream raw material suppliers, while allowing downstream customers to owe money to maintain long-term corporate orders. In this cycle of arrears, once the sales market of the company is unstable or the profit margin is declining, and the product quality cannot meet the customer's requirements, the arrears chain will break. "If the sales are unstable, it will cause the second round of borrowing, so that the company will borrow more and more, and finally go bankrupt. This is a vicious circle." Lin Sheng said.

Zhang Xiaofei, director of the High-tech LED Industry Research Institute, pointed out that if the supplier's credit period is extended, the bad capital situation of the company will be transmitted to the industry, and several suppliers will simultaneously ask the company for accounts. This will be like a bank run. When you ask for your account and you are out of stock, the company will soon get rid of it.

Zhang Xiaofei believes that the current overcapacity in the industry has also accelerated the spread of “chain debts” between enterprises to a certain extent. On the one hand, the overcapacity in the upstream has relaxed the enterprise's credit period, which has potentially fueled the speculative psychology of enterprises; on the other hand, the excess diffusion between upstream and downstream production capacity has lowered the average interest rate of the industry, which is also the source of the “Domino effect” of the serial debt.

According to industry analysts, one of the common phenomena is that once any industry makes money, a lot of money will flood into the industry. The final result is an overcapacity in the entire industry, followed by industry reshuffle. In the process of shuffling, “chain debt” will continue to be staged, because everyone thought that the whole industry did not have much risk, and the phenomenon of credit sales was more, but when the industry is in crisis, the problem will occur.

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