Wang Donglei: The timing of LED industry profit may be next year

"The LED industry has come out of the cycle of increasing revenues without increasing profits. It will not last long."

Wang Donglei, Chairman of Dehao Runda (002005.SZ), has recently decided to accept an exclusive interview with the reporter of China Business News. With his unique intuition about the LED industry, he cut into the market five years ago and then entered NVC Lighting (02222.HK) at the end of 2012. At this stage, he is making a strategic layout.

When Wu Changjiang, the founder of NVC Lighting, and investors were in dispute, Wang Donglei made a decisive attempt at the end of December 2012. By absorbing Wu Changjiang’s individual shares, he became the largest shareholder of NVC Lighting.

On the staff structure, on April 5 this year, he resigned as NVC Lighting, and the chairmanship was replaced by Wang Donglei. In early June, recommended by Wang Donglei, Wu Changjiang once again served as executive director of NVC Lighting. From the acquisition of NVC lighting by Dehao Runda, it took about half a year to return to Wu Changjiang.

“The cooperation between Dehao Runda and NVC has just begun.” Wang Donglei said that NVC Lighting is dominated by sales. Dehao Runda has always focused on manufacturing, and definitely needs a certain break-in period between each other. However, due to the business cooperation between the two parties (one is to sell terminal lighting products, one is biased towards LED chips and packaging technology), the two companies have a lot of cooperation space.

“Duohao Runda can use the other's huge sales channels to expand its business.” Wang Donglei believes that the cooperation with NVC is based on several aspects: First, the LED chips of Dehao Runda can supply NVC lighting, each other Upstream and downstream cooperation; Secondly, LED application products have obtained the license of NVC lighting brand, and can also enter the sales channel of NVC Lighting for promotion; third, they can also become "partners" on the project, such as August this year. The two sides set up LED packaging enterprises in Huizhou, Guangdong with a registered capital of 80 million yuan.

However, in terms of upstream and downstream cooperation, the upstream suppliers of NVC in the short term will not be transformed into Dehao Runda all at once. After all, the former has many suppliers, at least 200. But for Dehao Runda, it may benefit even more, because its downstream channels will become wider, which is also within the plan of Wang Donglei's acquisition of NVC lighting.

Wang Donglei does not deny that in the past, Dehao Runda was indeed positioned in the low-end LED chip products. To gradually adapt to the mid-to-high-end positioning of NVC, it is necessary to further strengthen its research and development strength. "This is no problem for us." And we also started to make technical reserves a few years ago, and we are almost at no cost in the investment in research and development." How much product can be sold through NVC lighting next year, how much sales are still unknown. But Wang Donglei said with a smile: "The numbers will definitely be surprising."

When the LED industry as a whole fell into a trough, Wang Donglei turned out to be optimistic: "The profitable time may be next year."

He said that in the first three years of a large number of government subsidies, LED upstream competition and oversupply, the industry has been depressed for a long time. Moreover, large-scale LED chip manufacturers such as Dehao Runda can support it, and it is also related to government subsidies and government procurement.

"If the government does not support and does not purchase high-priced LED street lamps from manufacturers, no one is willing to try this industry, nor can it develop so quickly. After three years, government subsidies should be over, but some LED chip companies have cash. The flow is positive, indicating that the market is also recovering." Wang Donglei said that in the past, an LED bulb of more than 50 yuan has now been reduced to more than a dozen yuan, the same price as energy-saving lamps. The change of this price system has promoted the development of LED lighting and stimulated market demand.

He feels that the downstream development of LED will be faster than the upstream, but companies like Dehao Runda will control the cash cost and actively adjust the business model, and the profit will be faster.

For example, in the production of LED chips, Dehao Runda has nearly 100 MOCVD equipment and is fully loaded. He also said that after cooperating with NVC Lighting, Dehao Runda's strategic focus has been adjusted, such as putting more energy into channels, brands and lighting. "In the past, the LED chip industry was making money, but now, The downstream of the LED lighting industry is significantly higher, and we will adjust it ourselves."

(This article is reproduced on the Internet. The texts and opinions expressed in this article have not been confirmed by this site, nor do they represent the position of Gaogong LED. Readers need to verify the relevant content by themselves.)

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