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LED foundry companies have to be in the middle of the lower curve of the smile curve
With the rise of the LED lighting market, LED lamps of various types are always emerging one after another, especially the first-line brand enterprises at home and abroad, their rich product series, and the strong production capacity reflected in the response to the ever-increasing orders. Few people wonder how they do it. The secret lies in the existence of a special group of foundry companies, which are equivalent to the R&D and production departments of brand owners and participate in the production of branded products. From processing to OEM to ODM, OEMs cover almost all aspects of LED production, except for brand operations and distribution channels. Foundry is bound to be a well-known in the field of LED foundry, the company is a manufacturing enterprise engaged in the research and development and production of LED indoor lighting products. In the eyes of its general manager Li Guoxin, foundry companies must have a comparative advantage in manufacturing, and their existence is in line with the demands of specialized division of labor. He said: Just as many products are developed by the United States, China is doing OEM work, research and development with research and development advantages, and manufacturing advantages, the parties do some matching work according to the resources they have mastered. It is the value of a specialized division of labor. In fact, as early as 1776, Adam, the father of classical economics. Smith pointed out in his masterpiece "The Wealth of Nations" that the division of labor will promote economic development, and the background of the rise of foundry enterprises is precisely because of the existence of a specialized division of labor. From a macroeconomic point of view, the number of Chinese labor forces determines that some enterprises must adhere to the development path of labor-intensive economy, which provides a survival soil for foundry enterprises. LED foundry companies are actually in line with China's economic structure dominated by manufacturing, which is an inevitable phenomenon of the entire LED industry and even the entire Chinese economy. Shen Wei, marketing director of Miracle Industries, said that foundry companies play the role of a migrant worker. Although they are not top-level designers, they are responsible for irreplaceable production in the LED application chain. Since the beginning of LED lighting in 2007, the biggest problem facing many LED companies is the survival problem. Enterprises have to adapt to the economic pattern dominated by manufacturing. In Shen Wei's view, the living environment of OEMs is relatively easier than that of branded LED companies. Because the brand must not only be familiar with the brand operation, but also set up channels to expand the market, the initial investment is huge, the profit is high and the risk is also great. And the OEM only needs to focus on the R&D and production areas, and deliver the goods on time and in good quality and quantity. According to relevant data, the proportion of domestic LED products for export is 80 or more. These foundry companies do not need to operate brands in overseas markets, nor do they need to build sales channels. They only need to deliver the products to foreign brands. Many companies are willing to help people to work when conditions permit, and there are also workshops dedicated to people's work in the market. Like bulbs, ceiling lights, downlights, candle lights, etc., they have an advantage in cost control. Now the minimum 1W of the hand workshop is only two or three cents. Lan Wenliang of Xianglong Optoelectronics believes that LED foundry is a very common phenomenon. For some foundry companies, they may be reluctant to accept the humble title of migrant workers, but instead position themselves as suppliers and deliver LED products to brands. In fact, this kind of supplier has always existed in the era of incandescent lamps or energy-saving lamps. From the current point of view, the LED foundry model will remain viable and adapt to China's national conditions for a long time to come, and there is still huge potential to explore. The transformation is hard. However, the embarrassing problem faced by LED foundry companies is its meager profit mode. Because there is no brand value added, LED foundry companies have to be in the middle of the smile curve, the profit margin is generally only 2-3. With the further increase of raw materials, labor costs, and the degree of competition, many foundry companies gradually entered A bottleneck in development. When the enterprise is in the bottleneck of development, seeking transformation is a strategy that must be considered. However, from the perspective of the composition of LED foundry companies, the main body is still some workshop-type small and medium-sized enterprises, and there are very few large-scale foundry enterprises. The transformation threshold faced by this type of foundry company is mainly focused on the issue of funding. Because these enterprises were originally developed under the condition that the funds were not sufficient, the profits accumulated in the foundry process were not enough to cover the large amount of funds needed for the transformation. In addition, the technological innovation required for the transformation requires a long-term training phase, including the forging of labor, the upgrading of technology, and the innovation of management mode. It takes time to accumulate, which will bring huge time cost to the enterprise. For most LED foundry companies, they have no conditions to digest these costs, and they have to give up the willingness to transform under the pressure of huge costs. Some foundry companies with certain capital accumulation and the ability to conduct technology research and development are still hesitant about the issue of transformation. Because there must be certain risks during the transition period, the current development trend of the LED industry is not stable, and the company's expectations for the future are uncertain. What if the technical innovation is not successful? What if there is a problem with the capital chain? A series of unstable factors make it difficult for OEMs to make up their minds to make these investments. The foundry companies that entered LEDs early did not have a precipitated heart. They did not have a clear market position and did not accurately assess their own resources. Shen Wei made an evaluation of the foundry enterprises that were affected by the transformation. He believes that many LED foundry companies can not correctly view their own strength, or blindly advancing, or shrinking, the transformation of ideas is not clear and firm, and ultimately will suffer losses.