Taiwan Unity Opto’s $25 million-funded LED photoelectric device production project broke ground at Beijing Digital TV Industry Park; Jangsu Dongbao Photoelectric Technology Co., LTD. has invested 1.2 billion yuan in construction of LED photoelectric industry park; Huaerbei Electric Appliance Co.,Ltd. has completed the construction of LED lighting product R&D center and production base.

Recent years have seen intensified investment in LED. No matter public enterprises, private businesses, or foreign companies, all seem to link “LED” to “making a big money”. Even businesses related to clothing, panel, real estate and cellphone have made their way to invest in LED industry. The industry is worried that this “sheep-flock effect” is likely to drain those investors before they are able to make a profit.

Undoubtedly, now the great market potential of LED industry has indicated unlimited business opportunity. With characteristics of energy efficiency, environment protection and digital design and capabilities of wide applications in backlighting, advertising display, auto lighting, traffic signage, general lighting, etc, LED accelerates to replace traditional light source. Above all, starting this month, the country has launched the phase-out of incandescent light bulbs, which, in no doubt, will spare more development space for energy-saving lights and LED lighting.

However, promising market prospect is the main incentive for this LED investment boom. In transaction process, there are echo-phenomena among LED investors who blindly follow others. This behavior is called “group psychology”, which is a common phenomenon in market behavior among enterprises. Due to lack of understanding about LED industry and inadequate information gained, LED investors feel hard to make proper projection about the uncertainty of future market. Generally, they rely on observations on industry peers to abstract information which tends to conformity and is intensified in the process of continuous pass-on, therefore, herd behavior occurs. 

A flock of sheep act without organization. However, once the leading sheep moves in a certain direction, the rest sheep will follow it blindly without any consideration of whether there is a wolf ahead or thriving grass not far away. Apparently, in recent years, the government has been trying to attract enterprise investment using incentive to spur the dynamic development of domestic LED industry investment. When the government is engaged in support for LED industry investment, how other investors can be expected to stand still?

In the area of Pearl River Delta, Guangzhou Guanggu, Jiuzhou Guanggu and Jiangmen Guangbohui are all established via the support or investment from the government. “Sheep-flock effect” generally occurs where a competitive industry has a pioneer (the leading sheep) which is the focus and example for the rest to learn.

The reporter was told by some industry insider that there are no more than two kinds of investors in LED industry: one is layman who knows nothing about this industry; another includes those who are attracted by the government’s financial subsidy and some even bid by offering low price.

The blindness in following others definitely will end up with phase-out. The most important thing upon entry to LED industry is creativity of your own. Innovative awareness and independent thinking capability are critical to joining any organization or start private business.

 Epilogue:

“Sheep-flock effect” tells us that general public in the market tend to lose their basic judgement, blindly following others without independent consideration. Therefore, sharp judgement on collected Information is an optimized way to reduce blind investment in LED via rational consideration. Rational guidance is needed to create regional brands and form scale effect, hence more good than harm. With increasing entrants to the market, the competition in LED industry will grow fiercer. LED investors have to pay attention to industry bubble and protect themselves from draining their capital and spirit.