LED display business crisis show on and on, a new LED enterprise on the verge of liquidation
In the morning of November 2nd, GG-LED was informed that given Shenzhen HiboLED photoelectricity Co.£¬Ltd delayed the payment of salary and business commission, the whole staff went to a strike and demonstrated in the front of the company gate. What’s more, judicial authority interfered and sealed up the company’s equipment. The GG-LED reporter rushed to the scene for investigation right away.
At the scene, around over 100 staff was found gathering at the company entrance, asking for salary, while part of production equipment inside workshops were attached with seal, reading “Shenzhen Baoan District People’s Court”, “November 11th, 2012”.
A combination of varied information tells that HiboLED owes salary and commission of about 2 million yuan to staff and 25 million yuan to suppliers.
The article of “Small-and-medium display enterprises try to break out in predicament” published in July issue of “GG-LED Professional LED Monthly- Research and Commentary” described that HiboLED delayed paying salary, which is confirmed finally now.
Sealed up due to delay salary payment
“Starting this August, the payment has been always delayed to over 10 days. So far, September wage is still in the air.” Complaints abound among the gathering of staff about unsteady salary payment and offering of meals.
Starting middle October, almost all staff have been asked to “take a leave.” A production line staff told reporter “We hardly worked in these two months, not to mention extra hours for time-off. They actually force us to take a leave in disguised form. No payment and no explanation.”
It is said that there was a previous strike back on October 25th when the company president Zhao Hui came to the spot in person, frankly saying that now the company indeed has some difficulty in capital, and begs for understanding from all. He promised to pay salary on October 30th, but his words are not kept.
The reporter was told by Gongming Court under Baoan District People’s Court that on October 31st, some representatives of HiboLED’s about 190 staff applied to Labor department for labor arbitration. In order to prevent the company from transforming equipment, representatives hurried to Baoan District People’s Court to apply for property preservation. In the morning of November 2nd, Gongming Court arrived at HiboLED and sealed up the equipment inside the factory by law.
In light of sealed equipment, gathering of workers and media presence, Zhao Hui repeated the same tactic. According to the staff, Zhao Hui promised again to pay the salary at 4pm on November 2nd, otherwise, he would jump from the building. However, up to the press time (19:00 November 2nd), the workers still did not get the money, and Zhao Hui had left the company.
The reporter has contacted HiboLED’s general manager, but he refused the interview because of no time, while president Zhao Hui’s cellphone is busy line. These two high-level personnel also did not respond to the reporter’s interview enquiry.
Fund chain break puts the company at stake
With several tries, finally, Mrs. Yao, director of a venture capital agent which was introduced by HiboLED latest, accepted a short interview with GG-LED. She frankly said that now the company is indeed short of capital, but it is trying every means to raise money. However, the internal staff all reflects that starting the second half of this year, the company has been delaying the salary payment all along and pays part of salary every two months. While it has made repeated promises to deliver full payment, up to date, the promises still have not come true.
Recently, its staff have frequently been called back to the factory and asked to check wages, sign the name, put fingerprint, hand in ID copy, etc. based on these, some staff presume that this LED display enterprises with 100 million-sales has planned to declare bankruptcy.
As a matter of fact, HiboLED has been receiving abundant orders and it is still delivering shipment in spite of operation suspension at workshops. According to employees of sales department, the shutdown of the factory is mainly due to that suppliers have stopped supply given the delayed payment of goods.
In fact, since the first half of this year, HiboLED has seen capital shortage and tried every means to finance. But its effort has not brought a favorable turn.
Many suppliers are unwilling to provide goods because HiboLED does not give deposit, while other supplies that offer supply do it off and on, including several listed companies in South China, East China, and other regions. Some Xiamen-based LED enterprise told reporter that this year, HiboLED owes to the company several millions yuan for payment of goods and it has stopped supply in recent months.
Due to capital shortage, staring October, suppliers have already begun to suspend supply to HiboLED. Starting the middle October, majority of staff have been asked to take a leave while the company is in operation suspension. Now its shipment basically comes from stock.
HiboLED records nearly 100 million yuan in sales volume last year, now the company has 25 million yuan in account payable to suppliers. “Every industry has its own payment mode.” Mrs. Yao said that although the company has more than 20 million yuan in account payable, the account receivable achieves up to more than 20 million yuan. In addition, suspension is a rumor. We had staff on work and shipment on November 1st.
For Mrs. Yao’s words, production line staff denied that there were only dozens of employees on work on November 1st, all of which are packaging workers. What’s more, the shipment came from stock and there has not been operation yet.
In order to compensate the debt to suppliers, HiboLED has started to use deposit that is pre-paid by clients. However, due to supply suspension, some clients with deposit have not received any goods. HiboLED hence entered vicious circle.
According to some well-informed employees, in the first half of this year, HiboLEDreceived two orders totally, one from home and the other from overseas, with deposit received at 1.5 million and 5 million yuan. But until now, the company has not delivered shipment to clients.
Lighting business dragged down the company
In recent years, many enterprises got caught in the continuous downturn of LED display industry. At present, the gross profit of LED display has fallen to the bottom, according to the statistics of GG LED Industry Institute (GLII). As a result, the majority of display enterprises began to move toward LED lighting market.
An analyst said the fund shortage of HiboLED may result from its unsuccessful LED lighting business.
In April 2011, Zhao Hui established Shenzhen Kesos Co., Ltd. to move in LED lighting and expected that LED lighting business can be a new growth point.
Zhao Hui wanted to establish Kesos as an all-in-one high-tech lighting manufacture integrating R&D, production, sales and service of LED chip packaging, LED driving power and LED application lighting. However, the transformation is accompanied with many risks. Kesos received some orders, but some customers were not satisfied with the quality.
Kesos has undertaken some LED lighting illumination projects under the terms of "finish the rest after a down payment". However, its products failed to meet the requirements of customers and were returned by customers for several times. “Due to the problem of quality, our products were returned and we couldn’t get the remaining payments. We didn’t make profit from LED lighting business,” said Mr. Li, a former employee in the market division of Kesos.
This September, HiboLED was extremely short of funds. Under the debt pressure of employees and suppliers, Zhao Hui had to dismiss Kesos.
Kesos got dismissed, but it didn’t bring the stability to HiboLED. The situation worsened and led to the workers' demonstration and the court’s attachment to the company.
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