First, China's LED enterprises need "strategic breakthrough"
Under the background of the country's vigorous promotion of energy-saving emission reduction and low-carbon economy, China's LED companies have worked hard to seize the domestic development opportunities, resist the global financial crisis, and achieved gratifying results.
Behind the achievements and opportunities, Chinese LED companies still face severe challenges and serious crises. Lack of LED epitaxial wafer and chip technology patents, long-term dependence on imported core technology, poor independent innovation ability, high cost, are the hard hit of China's LED companies.
On the surface, the lack of core technology is the bottleneck of the development of LED enterprises in China; in fact, the strategic issue is the biggest bottleneck for the development of LED companies in China.
Enterprises are profitable because of their operations, they develop because of management, they succeed because of strategy, and they are always young because of culture. Technology is a powerful competitive weapon for enterprises, but technology can play a major role only under the guidance of strategy.
Mr. Qi Zhongyang, general manager of Golden Gulf Consulting, said: “Strategic positioning determines the expansion mode, and the expansion mode determines the resource allocation.†In turn, the allocation of technical resources is determined by the expansion mode, and the expansion mode is determined by strategic positioning. Therefore, strategic positioning determines the allocation efficiency and output level of technical resources.
Therefore, China's LED companies need to rethink their strategies and achieve strategic breakthroughs.
Second, China's LED industry value chain analysis
(1) The law of "smile curve" in the industrial value chain
Generally, the complete value chain includes seven major links: technology research and development, raw material procurement, logistics supply, processing and assembly, order processing, marketing and branding.
In the early 1990s, Mr. Shi Zhenrong, the chairman of Taiwan Acer Group, proposed the “smile curve†and used an open parabola to express the added value of the industrial value chain. The front-end technology development and the back-end brand service have the highest added value, while the intermediate processing and assembly links have the lowest added value. The added value of different links in the industrial chain is connected into a line, forming a relatively symmetrical "smile" curve shape, hence the name "smile curve".
The LED industry value chain includes seven major links: epitaxial wafer design and development, single-chip design and development, material procurement for epitaxial wafers, chip processing, packaging testing, LED applications, and brand services.
In the international LED industry value chain division, Japanese and American companies have basically monopolized the epitaxial film design and development and single-chip design and development, which is in the high-end link of value chain added value; Chinese LED companies are mostly engaged in LED package testing and LED applications, in the value chain. The low end of the added value.
(II) Characteristics of the "long tail curve" of China's LED industry value chain
Our research finds that the value-added curve of China's LED industry value chain is not a relatively symmetrical "smile curve", but an asymmetric "smile curve" or "long tail curve". As shown by curve A in Figure 1.
In China's LED industry chain, LED epitaxial wafers and LED chips account for about 70% of the industry's profits, LED packaging is about 10%-20%, LED applications are about 10%-20%.
The LED epitaxial wafer and LED chip design and development and processing at the front end of the value chain occupy a very high added value; the added value of the LED application and brand service at the back end of the value chain is very low. In this way, the front end and back end of the value chain and the packaging test at the lower end of the value chain are connected into a curve. The curve does not form a relatively symmetrical "smile curve" but a "long tail curve".
LED industry belongs to high-tech industry, and its high-tech content determines the high added value of LED epitaxial wafer, LED chip design and development and processing. However, this is not the main reason. The current competitive landscape of China's LED industry is the main reason for the “long tail curve†of the LED industry's added value curve.
In the design and development of epitaxial wafers and single-chip design and development, China's LED companies are in an absolutely weak competitive position. However, Japanese and American companies rely on the monopoly advantage of technical patents to increase the added value of technology R&D, which leads to the high added value of the front end of China's LED industry value chain (the profit is almost occupied by Japanese and American companies).
Therefore, most LED companies relying on imported technology patents in China face extremely high technical costs. The market can accept the price of LED products is limited. In the fierce competition environment, domestic LED companies mostly use price wars in order to penetrate into the LED application market. Eventually the LED application and package test added value is compressed and its profit margin is suppressed. In addition, the development of China's LED industry is not yet mature, LED brand's brand operation and service marketing capabilities are relatively low, and the added value of brand services is relatively low.
On the one hand, the added value of epitaxial wafer and chip technology development was pulled up; on the other hand, the added value of LED applications and brand services was suppressed. In this way, the added value curve of China's LED industry presents a “long tail curve†rather than a “smile curveâ€.
(3) Development law from "long tail curve" to "smile curve"
The only constant is change! Enterprises must be highly focused on the development trend of the industry, industry boundary dynamics and industrial upgrading.
China's LED application market has great potential, LED will be widely used in large display, mobile phone display, TV display, car lighting, landscape lighting, commercial lighting, home lighting, traffic lights and other fields. This means that China's LED application market has great potential, and the added value of LED applications will be greatly improved.
With the continuous expansion of China's LED application market, on the one hand, more and more powerful enterprises have entered the LED epitaxial wafer, single-chip technology research and development and processing; on the other hand, the added value of LED applications and brand services are highlighted. Domestic LED companies join the technology R & D competition, it is possible to break the technical blockade of Japanese and American companies, and reduce the added value of LED epitaxial wafers, single-chip technology research and development and processing to a reasonable level. As China's LED enterprise market control ability increases, the added value of LED applications and brand services will inevitably rise.
Therefore, the value-added curve of China's LED industry value chain must develop from the "long tail curve" to the "smile curve", that is, curve A develops toward curve B.
The breakthrough path of LED enterprises in China: Steady and steady development of LED packaging testing technology and technology, and apply for relevant international patents; through capital and technology accumulation, gradually enter the technology development and processing of epitaxial wafers and chips. This is the conventional breakthrough path for Chinese manufacturing companies, and I became the Galanz model.
China's LED enterprises break through the path 2: innovative marketing model, control the huge LED application market; by controlling the market, establish a service brand, and force LED core technology companies to reduce the added value, while increasing the added value of LED applications and brand services. This is a new path for Chinese companies to break through. I call it the Lenovo model. Chinese LED companies must vigorously develop the application market, and seize the application market, control terminals, and create brands, thereby increasing bargaining chips and industry competitiveness.
Third, the key success factors of the market segment
The above analysis shows that China's LED enterprises can achieve strategic breakthrough through two ways: technological innovation and market reversal technology! This is the overall strategic direction! Because of the differentiation of competition and demand in each market segment, the strategy also exists. Certainly differentiated. We represent the differentiation of our strategies through key success factors in the market segment.
The key success factors of the market segment are based on the value chain, which is comprehensively analyzed from the competitive landscape of the market segment and the target customer demand.
According to the perspective of LED application, we divide the LED industry into six major segments: LED display, LED backlight, LED car light, LED Home Lighting, LED landscape lighting, and LED commercial lighting.
(1) LED display
Market Segment Overview: LED displays started early and have been widely used in stations, banks, securities, hospitals, and hotels. In terms of LED demand, LED display demand is the second in the industry, accounting for 23.1% of total LED sales, and the market size reached 3.24 billion yuan, becoming China's LED application market. In recent years, the LED full-color display has grown strongly, and the demand for stadiums, municipal squares, concerts, airports and other places has increased significantly.
Key success factors: public relations marketing, deep digging needs
The key success factor of LED display is not the development of value chain front-end technology, but the back-end Guan Gong marketing and deep digging needs. To apply LED display to stations, banks, securities, hospitals, hotels, stadiums, municipal squares, concerts, airports and other places, Guan Gong marketing is the key. In addition, LED display has obvious advantages, deep digging channels, and opening up new customers is the key, such as LED advertising display.
(two) LED backlight
Market segmentation summary: In the past few years, driven by color screen mobile phones, the backlight LCD market for mobile phone LCD panels has grown rapidly. However, in recent years, the mobile phone market has developed steadily, and the demand for LED backlights for mobile phone LCD panels has slowed down. With the rising demand for LCD TVs, LCD TV panel backlight LED market prospects are good.
Key success factors: resource integration, cost control
Although the mobile phone and LCD TV market have driven the rapid development of LED backlights, the problem of high LED backlight cost has been hindering the application of LED in this field. To be successful in the LED backlight market segment, key factors are resource integration and cost control. On the one hand, we must control the costs of procurement, production, logistics, etc.; on the other hand, we can integrate strategic resources and strengthen our enterprise technology research and development capabilities and market control capabilities. Enterprises and LCD TVs, consumer electronics manufacturers form a strategic alliance, strong market control capabilities, which force the epitaxial film, chip technology companies to reduce technology patent royalties, thereby reducing corporate costs. In addition, enterprises can also integrate the technical resources of foreign companies and improve their competitiveness through acquisitions and technical cooperation.
(3) LED car lights
Market Segment Overview: LED has obvious advantages in automotive lighting: low power consumption, long life and fast response. However, LED car lights have long certification time and low wattage per unit, which has caused LEDs not widely used in car lights. However, China's auto market is developing at a high speed, and the LED lamp market has great potential.
Key success factors: industry alliances, standards
LED car lights are not widely used, indicating that this market segment is not fully open. At this time, industry alliances are needed to promote the development of the LED automotive lamp market. Leading companies need to shoulder the responsibility of industry development, from "products" to "industries." For LED car lights, overcome technical difficulties, set standards, and apply for policies.
(4) LED household lighting
Market segmentation: With the growing awareness of global energy conservation and environmental protection, the world has entered the era of incandescent lamps. There are more than 300 million households in China, LED lighting has just started, and its market potential is immeasurable. In addition, the market potential of personalized LED decorative lights is equally huge. However, the high cost of LED lighting and poor heat dissipation have hindered the development of China's LED lighting market.
Key success factors: technological innovation, marketing innovation
Different from the LED backlight market and the LED automotive lamp market, the target customers of the LED lighting market are extremely fragmented, and it is difficult to reduce costs by using the market to reverse the technology. LED companies can only achieve technological breakthroughs through technological innovations, solve technical problems such as poor heat dissipation, and reduce costs. Marketing innovation is also a key success factor, breaking through market bottlenecks through marketing strategies such as product design innovation and brand concept innovation.
(5) LED landscape lighting
Market segmentation: LED landscape lighting is mainly used in squares, streets, theme parks, etc., and its main target customer is the government. LEDs are more and more widely used in landscape lighting due to energy saving, environmental protection and decorative effects. In addition, under the promotion of the government, the LED traffic light market has developed rapidly. At present, market opportunities have shifted from first-tier cities to second- and third-tier cities.
Key success factors: public relations marketing, government cooperation
LED landscape lighting (including LED traffic lights) customers are not price-sensitive customers, but the technology is not demanding. The key success factors for LED landscape lighting are public relations marketing and government cooperation. Many cities in China have launched the "Ten Cities and Ten Thousand Miles" and "Thousand Miles" LED Application Promotion Program. Through public relations marketing, enterprises seize the favorable opportunity and cooperate with the government.
(6) LED commercial lighting
Market Segment Overview: LED commercial lighting market refers to LED applications in hotels, high-end office buildings, high-end clubs, large service-oriented enterprises and other commercial places, the market size is huge, but the market has not yet started. The main reason is that LED commercial lighting has poor heat dissipation, high cost, and lack of standards.
Key success factors: contract energy management, industry alliance
LED commercial lighting customers, on the one hand, are very interested in the advantages of LED energy saving and high-grade decoration; on the other hand, they are sensitive to the price of LED commercial lighting. Contract energy management effectively solves the problem of high cost for customers by means of zero input from customers, and creates favorable conditions for LED application in commercial lighting. However, contract energy management does not fully adapt to China's market economy environment. Further research is needed to create a set of contract energy management methods that are in line with China's actual conditions. Common lighting problems such as poor heat dissipation and lack of standards need to be solved through industry alliances.
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