Foundry is the main mode of LED industry development in China

At the beginning of reform and opening up, China has become the best destination for the processing and manufacturing of low-end industrial chains in Europe, the United States, Japan and South Korea with low labor costs and favorable investment conditions. The LED industry is also the same. By vigorously developing the export-oriented OEM economy, a number of LED industrial zones in the coastal areas such as the Pearl River Delta, the Yangtze River Delta and the Chongqing Triangle have been formed. At present, foundry is still one of the main development models of China's LED industry. With the decline in the price of LED products, the intensification of market competition, the compression cost of brand enterprises, the continuous disappearance of domestic demographic dividends, and the rising cost of raw materials, the development of foundry companies has been severely constrained. In the face of a changing economic environment, LED foundry companies must actively transform their strategies, otherwise they will be eliminated by the market. The LED foundry mode mainly includes three modes: processing, OEM and ODM. OEM is original equipment manufacturing, commonly known as OEM; ODM is based on OEM, engaged in or involved in product development and design. At present, the domestic LED industry OEM is mainly OEM. Relevant data shows that the proportion of LED products exported to China has reached 80 or more. Many domestic SMEs focus on OEM business, mainly due to the pressure of survival. OEM orders are relatively stable, with short operating cycles, cash on delivery, and there is not much financial pressure and inventory. OEMs only need to focus on R&D and production. Branding requires huge upfront investment, high profits and high risks. A senior industry insider said. Affected by energy conservation and emission reduction policies, the demand for global LED terminal products has risen sharply. International lighting giants, domestic brand LED manufacturers and cross-border enterprises have entered the field of LED lighting, and continue to expand production capacity to seize the market, which provides OEMs with more development opportunities. OEM has become an effective way for brand operators to quickly seize the market. For brand operators with strong financial strength, strong brand influence, advanced technology research and development and rich market operation experience, the integration of product advantages through OEM can maximize production capacity and diversify products in a short period of time. . As the manufacturing value with the lowest added value on the smile curve, the labor cost difference is the main source of profit for the foundry company, because the customer will pay the OEM at a higher labor cost. However, as domestic labor costs and raw material costs continue to increase, the demographic dividends gradually disappear, and LED foundry companies can only rely on their volume to maintain profitability. Foxconn, the most influential foundry in the world, is best at large-scale production, labor costs and material cost control. Now it is also beginning to transform itself, taking its own brand and adopting machined production. It can be seen that the situation of small and medium-sized foundry enterprises is even more difficult. An industry insider said: In the past, for the processing of big brands, the profit is still OK, but with the increasingly fierce price war, the brand companies can keep the price low and the profit is getting thinner and less careless. It will lose money. In this regard, Professor Xu Chunming, deputy dean of the School of Intellectual Property of Shanghai University, said that China's foundry enterprises must transform, because the profit model of foundry lies in low labor costs, but in the past two years, China's labor costs have increased by 10-20 per year. , squeezed the profit margin of China's LED foundry industry. China's LED enterprises must realize the transformation from cost-driven to innovation-driven and take the road of independent brands.

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