LED price war or influence the upstream industry

At present, the main problem faced by LED companies is the difficulty of recovery of payment. Some small and medium-sized enterprises once the capital chain is tense, under the expiration of the annual closing price or the solicitation of payments from upstream suppliers, it is very likely that there will be an increase in loans for loan sharks, pawn assets, the running of companies and even chain failures. From raw materials to intermediate products to end consumer products, any delay in any link in the industry chain will have an impact.

“Equipment factory and lighting factory are used to longer term, but our material factory used to collect money in a short period of time. We basically buy the rare earth materials with cash. If the downstream payment is unpaid, we cannot recover cash in time. The cash flow is difficult to sustain.” Li Wei told the Securities Times reporter that phosphor materials producers are greatly affected by rare earth prices, and most cash transactions, if downstream companies accounted for severely, equal to the company interest-free to support customer working capital, but also bear The risk of rare earth price increases. For SMEs with relatively weak financial strength, capital chain breaks are particularly prone to occur.

“The problem of the triangular debt is a cancerous phenomenon in the industry.” An LED industry CEO said that customers defaulted on the payment of the application manufacturers, the application manufacturers defaulted on the payment of the packaging plant, and the packaging manufacturers went to default on the upstream chip and auxiliary material factory, which was originally normal. The industrial chain has become a risky debt chain.

In fact, the risk of this debt chain has been partially exposed. At the end of 2012, a group of LED display companies in southern China, represented by Shenzhen Yanduoli, had closed down due to funding disruptions.

At present, there are many companies involved in the LED industry, and the liabilities of the industrial chain have spread. Only from listed companies with public information, as of the third quarter of this year, the total balance of accounts receivable of 21 listed companies with LED as main business was as high as 5.519 billion yuan, and the balance of accounts payable reached 3.483 billion yuan. The total amount of accounts has accounted for 89.13% of the total revenue for the first three quarters.

Taking Sanan Optoelectronics, the leading chip maker of LED chips, as an example, the company’s accounts receivable soared from 352 million yuan at the beginning of the year to 307 million yuan at the end of the third quarter, an increase of 100.92%, and bills receivables also increased by 591.39% from the beginning of the year. The company explained that the substantial increase in the bills receivable was mainly due to the settlement of the sales receipts.

It is understood that the current LED chip companies in the account period is generally five or six months, accounts receivable and revenue close to 1:1 relationship, but some listed companies to make part of the accounts receivable inside the commercial paper, so The amount of accounts receivable seen from the financial report is lower.

Poorly funded companies are well aware of the supplier's supply mentality. "A lot of downstream manufacturers do not have cash to pay suppliers. Suppliers also approach, not to continue to supply means inventory and book losses." Responsible for a domestic chip company leader said.

According to industry insiders, the current financial constraints faced by LED companies are mainly due to difficulties in recovery of payment. From raw materials to intermediate products to end consumer products, any delay in any link in the industry chain will have an impact. Some small and medium-sized enterprises once the capital chain is tense, under the expiration of the annual closing price or the solicitation of payments from upstream suppliers, it is very likely that there will be an increase in loans for loan sharks, pawn assets, the running of companies and even chain failures.

Behind the LED industry's triangular debt is the result of overcapacity in all aspects of the industry chain.