Chen: How LEDs illuminate PE

The surging LED lighting market may be a new feast for China's manufacturing industry.　　Rational PE should avoid irrational thinking of investing in solar energy industry in this field, starting from the manufacturer of LED application end, take a bottom-up investment road. Sequoia Capital investment in the dry photo photoelectric (300102) listed, the famous PE company in just two years through the investment led industry has created a new miracle-according to current market capitalisation, its investment value-added more than 20 times. LED, this new lighting technology has not only illuminated our lives, but also began to illuminate the PE investment community. In a short span of several years, China's led industry has been crowded with industry and non-industry investors, only in the LED lighting applications, nearly two years on the emergence of nearly 4,000 enterprises. With "disorderly flower gradually want attractive eye, shallow grass can not horseshoe" described the situation of this industry is quite appropriate, on the one hand is lively market participants, on the other hand is the uneven development of the industrial chain. What are the investment opportunities in this shiny industry?　　In the past few years, the photovoltaic industry, wind energy investment retreat, can give this wave of LED market participants to leave what enlightenment? Industry income Model: Upstream decision the downstream semiconductor lighting is recognized as one of the most promising technologies in the 21st century, and it opens up the third lighting revolution in human society, which contains huge economic benefits. Over the past decade, the global led market scale of annual growth rate of more than 20%; High brightness led market growth more rapidly, 1995-2005 annual growth rate reached 46%, 2008 market size reached 5.1 billion U.S. dollars, the proportion of the LED market from 2001 40%　　Growth of more than 80% in 2008, the conservative forecast of 2012 years of market size is expected to reach 11.4 billion U.S. dollars. In this industrial chain full of bright spots and values, upstream enterprises take more than 70% of the profits, which is a capital-intensive, high technical content, high profit return link. And the upstream core patent technology is concentrated in Japan Asia (Nichia), the United States Corey (Cree), Germany Osram (Osram) and other foreign giants in the hands of a typical oligopoly (annex).　　In the field of epitaxial films and chips, American and Japanese companies are also in a monopolistic position. The size of the entire led industry, depending on the upstream manufacturers of technology research and development direction, capacity. At present, the main factors restricting the development of LED industry are two: first, the technology, such as light efficiency conversion rate is low, lumen speed of the industry standards are not promulgated, such as light chroma, and the other is relative to the hot application end of the market, with the core technology manufacturers have insufficient capacity.　　The semiconductor industry's "Moore's Law" in the LED industry has not appeared, 2010, in the upstream mainstream manufacturers in the case of expansion, the chip factory prices do not fall, the middle and downstream manufacturers are more in the Shami or even shut down to the situation. At present, in the upstream chip development and the grain, the middle reaches the encapsulation, the downstream application domain, already has the Chinese enterprise to intervene, but the domestic chip manufacturer concentrates in the small power, in the low-end domain, including the smallPower chip in the field of three photoelectric, dry photo photoelectric and other enterprises.　　Limited to technology, capacity and other reasons, the current domestic chip accounted for less than 10% of the supply market, has not entered the ranks of mainstream suppliers. Most of China's led manufacturers, only in the industrial chain at the end of the packaging applications, for the remaining less than 40% of the profit, this reality similar to the previous years of the solar polysilicon industry. At present, China has more than 4,000 led enterprises in the middle and lower reaches, they are mainly concentrated in manufacturing, accessories processing, design industry, characterized by small investment, industrial building fast, unit output value is not high, belongs to the traditional processing industry, but its biggest advantage is close to the market, responsive, if the market boom, It is possible to grow large enterprises. Especially the LED application end market in recent years, LED backlight, display, hair light market are geometric level of growth.　　Market demand has led to the development of production links, domestic production quality assured LED lighting manufacturers have harvested a large number of orders this year, Foshan lighting, NVC lighting are in this rapid transformation, there are other industries of large enterprises to move to this market. The development of Taiwan LED industry can provide reference for mainland enterprises. In the 90 's Taiwan led industry in the early years of development, in-line enterprises are pyramid-shaped, downstream enterprises are numerous, upstream enterprises are few. However, with the expansion of the market scale, in the middle and lower reaches of the scale of enterprises to start into the upstream, the emergence of the National Union photoelectric, crystal Photovoltaic and other master high power chip Technology international suppliers, packaging area is a light treasure, light lei such scale enterprises, in the downstream application areas,　　and other billion-ray focus on automotive instrumentation LED application of enterprises, gradually formed a complete industrial chain. The growth of the mainland led industry should also follow this bottom-up approach.　　Lenovo's early trade and technical model, may be worth domestic led enterprises to learn from-seize the market opportunities, strengthen their own strength, in technology, market accumulation on the basis of the upstream extension, vertical industry chain is a chance to wait. PE Investment Opportunities: Technology or the market is facing a hot market opportunity led industry, has won the favor of many PE. January 2010, investment funds, IDG and other private capital to Wuhan Hua can invest 150 million yuan, the application of the field of lighting, 3 years to attract deep investment, special change electrician, million to the group and other institutions of the venture capital nearly 600 million yuan, January 2010, diligent on the photoelectric again financing 20 million yuan, The last scramble to enter the capital is several times this. In PE, the Jinsha River has a special interest in LED industry, which has invested in the core light, crystal can photoelectric, crystal and lighting, easy to the United States core light, such as four enterprises, of which, too when the core light to do red and yellow wafer and chip, crystal can mainly do blue, green chip, easy to do the United States core light backlight, lighting LED packaging, application,　　Crystal and lighting is mainly engaged in LED lighting, covering the entire chain of the industry. The enthusiasm of PE stems from the exemplary effect of high returns. 2010 8The company, headquartered in Xiamen, is listed on the Gem, the 2008 Sequoia China to invest 10.22 million U.S. dollars, at this time the return has reached 22 times times. At present, the A-share main business or involved in LED enterprises nearly 10, the industry average PE in more than 40 times times, higher than other industries.　　As more and more led companies are listed, they will see a high return on investment in the industry. However, for local PE, the upstream link of high profit is not necessarily the best investment choice. The number of domestic manufacturers engaged in chip research and development, small scale, technology to be tested by the market, but also need a lot of capital investment, such as in Shanghai to build a LED chip industrialization enterprises, the total investment of nearly 5 billion yuan. Therefore, this part of the investment should be in line with the strength of large enterprises and the government's industrial investment funds as the leading, PE participation in investment, the technical risks, industry risks are not easy to grasp.　　Perhaps from the LED application-side manufacturers, a bottom-up approach to investment is the local PE can choose the path. Then, in the LED industry in the middle and lower links, what kind of enterprises are worthy of investment, what is the core competitiveness of enterprises? Overall, in the field of application of the sub-industry with core technology or scale advantages of enterprises, it is worth focusing attention.　　and encapsulation, application end Enterprise's core competitiveness, should be based on quality control, Applied technology development comprehensive ability, and do not have to adhere to the current vertical industry chain extension, core technology. China's manufacturing industry is now from the early "fill" to the OEM, ODM mode, the process, Japan, Taiwan enterprises have too much to be a systematic study of the mainland enterprises. Fuji Cannon will be the world's largest PC outsourcing services, Japanese products can become a synonym for quality, all stems from the firm's persistent pursuit of product quality, its core competitiveness embodied in the manufacturing process, quality control, logistics procurement and other aspects of the integrated management capabilities, rather than simple technology. On the other side, after the 2008 Beijing Olympic Games, the life of LED street lamps and the overall performance as expected were not good, and the buyers began to question their quality, which affected the purchasing intention.　　Therefore, the integrated management ability of LED enterprise is the factor that PE should pay special attention to. Policy guidance + financial support: Led prospects are more and more bright because the core technology, equipment by foreign manufacturers, the development of China's led industry chain is subject to certain constraints. Technology, talent, patent, is the overseas upstream manufacturers dug three moat.　　To cross these gaps requires a lot of investment in technology, time and money, and the need for national policy support. From the technical principle, led light-emitting technology is the future of the mainstream of light source technology. At present, LED lighting mainstream technology has matured and industrialized, quality is rising, unit product prices continue to decline, is a major trend. Therefore, Governments are actively introducing policies to support the development of the industry. In the LED power Japan, Miti 1998, the first issue of the 21st century Light plan, through financial subsidies, tax concessions and loansPreferential policies, leading the world to stimulate the development of LED technology. In 2005, the U.S. government launched the next generation lighting program to support the development and establishment of industry standards by government funds and to implement tax incentives for LED industries. The US Department of Energy spent 500 million dollars in 2000-2010 years developing semiconductor lighting to replace 55% of incandescent and fluorescent lamps. 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 to eliminate 100-25 watts of incandescent light bulbs in 2009-2012 in five phases.　　These policies strongly promote the local led enterprises occupy the commanding heights of global competition, the enterprises of these countries and regions have taken the LED industry chain more than 60% of the profits, is the industry's biggest winner; the local LED lighting civil market also quickly started, its environmental protection and energy efficiency immeasurable. Since 2006, the state and local governments have issued policies to encourage the use of energy-efficient lighting products in such ways as fiscal subsidies. such as Nanchang 2009 issued "Ten City Million" project, in public places to carry out demonstration LED lighting, and to discount loans, loans green channel, energy contract management and other financial means to support the development of LED industry in the region. Shenzhen has also introduced a series of LED development supporting policies, covering industrial park construction, application research and development, public technology platform, international centralized procurement, patent alliance and other industrial chain key links.　　Government support, so that the domestic LED lighting market in the government to pay for the public domain first started. However, these seemingly enthusiastic policies also appear in the implementation of a variety of strange elephants. such as in the LED public lighting field, one of the strange elephant is who investment led who get local orders, the local government will be investment and LED Highway application combination, investment to an LED manufacturer to build industrial park, Industry circle, the local highway works all use its products.　　And some manufacturers have not formed the order of production capacity, can only outsource the installation of products, the quality of its products are not guaranteed, resulting in some city led street lights, half dark half, the manufacturers themselves did not form a real technology, production capacity. The second is that some local governments treat led highways with "energy contract" management, most of which are paid in the form of savings in electricity tariffs in the coming years. However, the domestic led manufacturing enterprises are mostly in the initial stage, the Bank financing platform, products did not really form, no cash income "energy contract" sales, so that enterprises do not invest in municipal engineering no survival ability, the successful bidder may die faster.　　Enterprises to finance, take a single, despise the promotion of production capacity, will lead to the quality of many LED products are not guaranteed, thereby hurting the real effort to do quality control, technology research and development of enterprises, the negative impact on industry is extremely far-reaching. Are China's led manufacturers still going to the Red Sea, which is the price, the relationship and the scale of the fight? In this emerging industry, the government should have a long-term plan and play a positive role in guiding the industry, rather than just being enthusiastic about the various "energy-saving shows", "Environmental show". The surging LED lighting market may be a new feast for Chinese manufacturing enterprises. Rational PE should avoid the irrational thinking of investing in the solar energy industry in this field, and choose the right enterprise with the principle of marketization to illuminate the future of the producer and PE.