Starting from the third quarter of last year, LED industry encountered a turning point and went downward from the fourth quarter. Up to now, LED industry hasn’t risen from the bottom.

On October 25^th, Liantronics released the financial report of Q3 starting from July to September, according to which the operating revenue of the company totaled RMB 140 million, edged 2.52% higher, but the net profit declined 30.2% and the profit of the first nine months dropped 25.99%. According to the company, the complex macro economy at home and abroad and the more intense market competition led to the slow growth in revenue and slight decline in gross margin.

In terms of the decline in profit margin, Liantronics is not alone in the LED industry, Changelight saw net profit drop of 45.91% and operating revenue drop of 13.14% in the third quarter. The company explained that starting from the third quarter of last year, LED industry encountered a turning point and went downward from the fourth quarter. Up to now, LED industry hasn’t risen from the bottom.

"Just by making a comparison,you will know that it is a common problem of the whole industry and not a problem of a single company in operation. Comparing with industrial peers, we are quite strict in product cost control."

LED chip producer HC Semitekdelivered total operating revenue of RMB 71.03 million in the third quarter, a year-on-year decline of 40.61%. The company achieved net profit for public shareholders of RMB 5 million, down by 76.73% year-on-year.

HC Semitek stated in the financial report that the unfavorable factors that affected the performance of the first half year still existed in the third quarter and the market competition is still fierce, which resulted in the sharp decline in the operating data. And a person in charge of the bond departmenttold our reporters that the company delivered bad performance for the reason that it didn’t receive any government subsidy.
 
According to the statistics of our reporters, totally 20 LED enterprises released the financial reports of Q3 2012, 11 of them saw net profit decline at various levels, accounting for 55%.

Wu Yulin, president of Foshan Lighting Fixture Association, made an analysis to our reporters. At present, the bad economic environment at home and abroad is one of the reasons that caused the prevailing recession of LED enterprises. And more profoundly, a large number of enterprises and capital swarmed into the industry, which resulted in the investment overheat and excess capacity.

"From the second half of last year, LED industry has entered into a shuffle period and just came across the bad situation in global economy. Everyone was expanding its business, but actually the market demand was limited at that time," said the above-mentioned person in charge of the bond department.

Guo Xiu, Secretary General of Guangdong Lighting Appliances Association, noted that the investments made by enterprises in the previous two years have been put into mass production, which resulted in the over-supply. In this case, those enterprises can do nothing but reduce prices for fear of greater losses. Guo Xiu added that the supply of LED related products exceeds demand at present and the industrial reshuffle will continue to the middle of 2014.

According to Wu Yulin, to find a way out, LED enterprises must expand the range of downstream LED applications to drive the sectors of the upstream and the midstream. In addition, he added that enterprises should attach much emphasis on designing to meet the individual demands of customers.