The rushing LED lighting market may be a new feast for Chinese manufacturing. Rational PE should avoid investing in the irrational thinking of the solar industry in this field, starting with LED application-side manufacturers and taking a bottom-up investment path. The company's investment in the production of Sequoia Capital was listed. This famous PE company has created a new miracle by investing in the LED industry in just two years. According to the current market value, its investment has increased by more than 20 times. LED, this emerging lighting technology not only illuminates our lives, but also illuminates the PE investment community. In just a few years, the various sectors of China's LED industry are crowded with industry and non-industry investors. In the LED lighting application, nearly 4,000 companies have appeared in the past two years. It is quite appropriate to describe the situation of this industry with the singularity of squandering flowers and the sleek eyes of Asakusa. On the one hand, it is a lively market participant, on the other hand, the uneven development of the industrial chain. What are the investment opportunities in this sparkling industry? In the past few years, the enthusiasm of the photovoltaic industry and wind energy investment has retreated, what can be left to this wave of LED market participants? Industry revenue model: upstream determines downstream Semiconductor lighting is recognized as one of the most promising technologies in the 21st century, opening the third lighting revolution in human society, with enormous economic benefits behind it. In the past ten years, the global LED market has grown at an average annual growth rate of more than 20%; the high-brightness LED market has grown more rapidly, with an average annual growth rate of 46% in 1995-2005, and a market size of $5.1 billion in 2008. The proportion of the LED market has increased from 40% in 2001 to over 80% in 2008. It is conservatively estimated that the market size in 2012 is expected to reach US$11.4 billion. In this industry chain full of bright spots and values, upstream companies have taken more than 70% of profits, which is a fund-intensive, high-tech, high-profit return. The upstream core patent technology is concentrated in the hands of a few overseas giants such as Japan's Nichia, Cree, and Osram. It is a typical oligopoly operation (schedule). In the field of epitaxial wafers and chips, US and Japanese companies are also in a monopoly advantage. The scale of the entire LED industry depends on the upstream research and development direction and production capacity of upstream manufacturers. At present, there are two main factors restricting the development of the LED industry: First, technologies such as low conversion efficiency of light efficiency, unresolved industry standards for lumens, and color chromaticity; second, relative to the hot application market, with core technologies. The manufacturer has insufficient capacity. The "Moore's Law" of the semiconductor industry has not yet appeared in the LED industry. In 2010, in the case of the expansion of the upstream mainstream manufacturers, the ex-factory price of the chips did not fall, and the mid-stream and downstream manufacturers were mostly in the same pot and even stopped working. situation. At present, Chinese companies have been involved in upstream chip development and die, midstream packaging, and downstream applications, but domestic chip manufacturers are concentrated in low-power, low-end, and low-power applications. Sanan Optoelectronics, Ganzhao Optoelectronics and other enterprises. Due to reasons such as technology and production capacity, domestically produced chips account for less than 10% of the domestic market, and have not yet entered the ranks of mainstream suppliers. Most Chinese LED manufacturers can only compete for less than 40% of the profits in the packaging applications at the end of the industry chain. This reality is similar to the solar polysilicon industry in previous years. At present, there are more than 4,000 middle and lower-end LED companies in China. They are mainly concentrated in manufacturing, auxiliary materials processing and design industries. They are characterized by small investment scale, fast industry establishment and low output value. They belong to the traditional processing industry, but their largest. The advantage is close to the market and responsive. If you seize the market boom, you may grow into a large enterprise. In particular, the LED application market has developed rapidly in recent years, and the LED backlight, display, and illumination source markets have all grown geometrically. Market demand has driven the development of production links. LED lighting manufacturers with guaranteed domestic production quality have received a large number of orders this year. Foshan Lighting and NVC Lighting are rapidly transforming into this, and large enterprises in other industries are turning to this market. The development of Taiwan's LED industry can provide reference for mainland enterprises. In the early days of the development of Taiwan's LED industry in the 1990s, the companies in the industry were pyramid-shaped, with a large number of downstream enterprises and few upstream enterprises. However, with the expansion of the market scale, enterprises that have formed scales in the middle and lower reaches have begun to cut into the upstream, and there have been international suppliers who have mastered high-brightness and high-power chip technology, such as Guolian Optoelectronics and Jingyuan Optoelectronics. Such large-scale enterprises such as Guanglei have formed a complete industrial chain in the downstream application fields, such as Yiguang and other companies focusing on automotive instrument LED applications. The growth of the mainland LED industry should also follow this bottom-up path. Lenovo's early trade technology model may be worthy of reference for domestic LED companies. Seize the market opportunities and expand their own strength. On the basis of technology and market accumulation, the vertical industry chain is an opportunity that can be waited for. Investment opportunities for PE: technology or market The LED industry, which faces the hot market opportunity, has won the favor of many PEs. In January 2010, the investment fund, IDG and other private capital invested 150 million yuan in Wuhan Huacan; the application of lighting in the field of Qinshang Optoelectronics, three years to attract the risks of institutions such as Shenzhen Venture Capital, TBEA, Wanxiang Group The investment was nearly 600 million yuan. In January 2010, Qinshang Optoelectronics refinanced 20 million yuan, and the funds that entered the competition were actually several times. Among PE, Jinshajiang Venture Capital has a special liking for the LED industry. It has invested in four companies including Taishixinguang, Jingneng Optoelectronics, Jinghe Lighting and Yimeixinguang. Among them, Taishixinguang does Red and yellow light epitaxial wafers and chips, crystal energy optoelectronics mainly do blue and green light chips, Yimei core light to do display backlight, lighting LED packaging, application, crystal and lighting mainly engaged in LED lighting, covering this industry All the chains. The enthusiasm of PE stems from the demonstration effect of high returns. In August 2010, the company based in Xiamen was listed on the GEM. In 2008, Sequoia China invested 10.22 million US dollars, and the return has reached 22 times. At present, there are nearly 10 companies engaged in or involved in LED business in the A-share industry. The industry average PE is 40 times higher than other industries. As more and more LED companies go public, they will see high return on investment in this industry. However, for local PE, the high-profit upstream link is not necessarily the best investment option. The number of domestic manufacturers engaged in chip research and development is small and the scale is small. The technology needs to be tested by the market, but it also requires a large amount of capital investment. For example, an LED chip industrialization enterprise will be built in Shanghai with a total investment of nearly 5 billion yuan. Therefore, the investment in this link should be dominated by large-scale enterprises with strong internal strength and government investment funds. PE participates in investment, and the technical risks and industry risks are difficult to grasp. Perhaps starting from the LED application-side manufacturer, taking a bottom-up investment path is the path that local PEs can choose. Then, in the middle and lower reaches of the LED industry, what kind of enterprise is worth investing, what is the core competitiveness of the enterprise? In general, enterprises with core technologies or scale advantages in the application field sub-sectors deserve special attention. The core competitiveness of packaging and application enterprises should be based on the comprehensive capabilities of quality control and application technology development, without having to be constrained by whether there is vertical industry chain extension or core technology. China's manufacturing industry is currently undergoing a transition from the “three to one supplement†to the OEM and ODM models. In this process, Japanese and Taiwanese companies have many places worthy of systematic learning by mainland enterprises. Foxconn can make PC outsourcing services the world's largest. Japanese products can be synonymous with quality. They all stem from the pursuit of product quality by manufacturers. Its core competitiveness is reflected in the comprehensive management of manufacturing processes, quality control, logistics procurement and other aspects. Ability, not pure technology. On the other hand, after the 2008 Beijing Olympic Games, the LED streetlights completed before the meeting and the overall performance were not as expected as the negative news, and buyers began to question their quality, which in turn affected the willingness to purchase. Therefore, the comprehensive management ability of LED enterprises is a factor that PE should pay special attention to. Policy guidance + financial support: LED prospects are getting brighter and brighter As the core technologies and equipment are subject to foreign manufacturers, the development of China's LED industry chain is subject to certain constraints. Technology, talents, and patents are the three moats that foreign upstream manufacturers have dug. To overcome these gaps requires a large amount of investment in technology accumulation, time and capital, and more support from the state. From the technical principle, LED lighting technology is the mainstream technology of the future light source. At present, LED lighting mainstream technology has matured and industrialized, quality is rising, and unit product prices are falling, which is a general trend. Therefore, governments have actively introduced policies to support the development of this industry. In the big LED country of Japan, the Ministry of International Trade and Industry introduced the first "21st Century Light Plan" in 1998, and led the global development of LED technology through financial subsidies, tax incentives and loan concessions. The US government launched the "Next Generation Lighting Plan" in 2005 to support corporate R&D and establish industry standards with government funding, and implement tax incentives for the LED industry. The US Department of Energy spent $500 million in 2000-2010 to develop semiconductor lighting to replace 55% of incandescent and fluorescent lights. The European Union launched the “Rainbow Project†in 2007 to promote the growth of high-brightness outdoor lighting and high-density optical disc storage markets, and eliminated 100-25 watt incandescent lamps in five phases in 2009-2012. These policies have effectively promoted the local LED companies to occupy the commanding heights of global competition. Enterprises in these countries and regions have separated more than 60% of the profits in the LED industry chain, which is the biggest winner of this industry; the local LED lighting and civilian market has also started rapidly. Its environmental protection and energy saving benefits are immeasurable. Since 2006, the state and local governments at various levels have also issued policies to encourage the use of energy-efficient lighting products by means of financial subsidies. For example, Nanchang City launched the “Ten Cities and Ten Thousand Miles†project in 2009, and carried out demonstration LED lighting in public places, and supported the development of the LED industry in the region with financial means such as discount loans, green channels for loans, and energy contract management. Shenzhen has also introduced a series of LED development supporting policies, covering key links in industrial park construction, application research and development, public technology platforms, international centralized procurement, and patent alliances. The government's support has led the domestic LED lighting market to take the lead in the public sector where the government is paying for it. However, these seemingly enthusiastic policies have also appeared in various implementations. For example, in the field of LED public lighting, one of the strangers is who invests in LED who gets the local order, the local government will combine investment and LED road application, and invites a LED manufacturer to build an industrial park and industrial circle, and the local road project is all Use its products. Some manufacturers who have received orders have not yet formed production capacity. They can only install products for outsourcing, and the quality of their products is not guaranteed. As a result, some urban LED street lamps are half brighter; the manufacturers themselves have not formed real technology and production capacity. The second thing is that some local governments treat LED road projects with “energy contract†management methods, and most of the payment is paid in the form of saving electricity bills in the next few years. However, most of the domestic LED manufacturing enterprises are in their infancy, the bank financing platform and products are not really formed, and the “energy contract†sales method without cash income makes the enterprise not able to invest in municipal projects without survivability, and the winning bid may die faster. Re-financing and re-financing of enterprises and ignoring the improvement of production capacity will also lead to the insufficiency of the quality of many LED products, thus hurting the enterprises that truly invest in quality control and technology research and development, and the negative impact on industrial development is extremely far-reaching. China's LED manufacturers, are they still going to fight for price, fight, and scale the Red Sea? In the initial stage of this emerging industry, the government should have long-term planning and play an active role in guiding the industry, not just It is keen on various "energy-saving shows" and "environmental show". The rushing LED lighting market may be a new feast for Chinese manufacturers. Rational PE should avoid investing in the irrational thinking of the solar industry in this field, and choose the right enterprise based on the principle of marketization, which will illuminate the future of producers and PE.
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