[Source: "High - tech LED - Research and Review " November issue reporter / Tang Guirong]

According to the recent research results of the High-tech LED Industry Research Institute (GLII), the "triangular debt" problem is different in different aspects of the LED industry chain. However, it is worrying that this phenomenon of mutual arrears of goods has spread further. The expansion of the trend, especially in the field of LED display is the worst.

According to GLII statistics, there are as many as 200 LED display companies in the first half of this year. A number of LED display companies with annual sales scales of over 100 million yuan including Big Eye, Haobo Optoelectronics, Vision Optoelectronics, and Bright Color Optoelectronics all fall on the capital chain break.

The main reason for the problems in the corporate capital chain is the “triangular debt”. The accounts receivable and accounts payable are rising rapidly, the cash flow is tight, and the supplier’s debt collection has caused the company to quickly get into trouble.

At the same time, the difference in the sales strategy of LED display companies has also caused the rapid rise of accounts receivable and the risk of bad debts to a certain extent. According to the data, as of the end of the third quarter of 2012, the sales receivables of Liarde Optoelectronics (300296.SZ) and Lianjian Optoelectronics (300269.SZ), which are mainly direct sales, accounted for 29.16% and 26.61% of the total assets, respectively. The channel-based Zhongming Technology has a receivables accounted for only 9.09% of total assets.

Shi Yaozhong, chairman of Shenzhen Ruituo, believes that enterprises with a scale of hundreds of millions but not listed will have a very serious situation if they want to continue to expand their production scale but have no follow-up funding support.

In particular, the display industry has entered the integration period, and companies are hoping to find a way out through IPO listing. Most companies choose the former between sprinting performance and improving corporate cash flow. Increasing credit sales and actively “selling” products to customers led to a significant increase in accounts receivables, and the receivables turnover rate dropped sharply. Accounts receivable also became the “invisible bomb” behind the company’s brilliant performance.

Sprint IPO buried hidden dangers

At present, including Abbison, which has not yet been listed on the market, there are already 6 listed companies with LED display as their main business in the domestic A-share market. “Everyone wants to grasp the LED concept to make the final sprint. Once the IPO is successfully listed, the company can quickly solve the cash flow problem, whether it is to expand production capacity or to survive the industry.” An industry insider admits that such an idealized state is for many Businesses are just drinking and quenching thirst.

Recently, Shenzhen Daguangjie Optoelectronics defaulted on the supplier's 70 million yuan payment incident was exposed, "High-tech LED" reporter learned that as early as 2010, Big Eye Optoelectronics has been caught in the shortage of capital chain. At this time, Big Eye Optoelectronics entered the vision of CSST (China Security Technology Co., Ltd.).

The first security company listed overseas, completed its privatization delisting in 2011. Since then, CSST has formed four sub-groups such as Smart China, Security Firefighting, Energy Saving and Emission Reduction, Investment and Financing through the integration of its segment business, and plans to spread the sub-groups' steps and listings frequently.

LED as one of the areas of energy saving and emission reduction, the two sides hit it off. In 2011, CSST invested 16.1 million yuan to acquire a 70% stake in Bigeye. "At the time, the two sides signed a gambling agreement. The general content is that the big eye must complete the performance indicators issued by CSST within the set time limit." A person involved in the acquisition negotiations told reporters.

Since then, in order to complete the performance indicators, Big Eye Optoelectronics began to expand wildly in the LED display market. An employee who worked for Big Eye Optoelectronics revealed that the company was mainly targeting the engineering market and had received a large number of orders in a way that eased the account period. A marketing department staff of Daeyejie Optoelectronics told reporters that in 2011 the company's sales reached 300 million yuan, and its income doubled from the previous year. At this time, Da Yingjie Optoelectronics' external accounts payable has also reached about 70 million yuan.

On the one hand, the accounts receivable continue to increase, on the other hand, the accounts payable cannot be paid in time. "In fact, by the end of 2011, the company's book cash for Daguangjie Optoelectronics had already been emptied," said the source.

"Not only the big eye, most of the domestic LED display companies with billions of revenues are hoping to support the company to become bigger and stronger through IPO listing." Li Huanqiang, marketing manager of Huahai Group, said that in a certain sense, it will be able to successfully list. The only way to become a LED display company. According to the statistics of the High-tech LED Industry Research Institute (GLII), as of the end of 2011, there were more than 50 LED display companies with a domestic revenue of more than 100 million yuan.

The monetary tightening, the global economic environment is not ideal, and the LED display industry has also entered the phase of reshuffle. "Many companies can only choose to let go." The above-mentioned person said that if the company is in the status quo, there is only one dead end.

Price war aggravated risk

In fact, in recent years, the output value of the LED display industry has been increasing year by year. GLII statistics show that in 2011 China's LED display output value was about 21.9 billion yuan, an increase of 18%. Although it has declined compared to the 54% year-on-year growth rate in 2010, GLII expects that by 2015, the global LED display market will maintain an average annual growth rate of 10%-20%.

"In fact, the market demand has not decreased. Bigeye, Haobo Optoelectronics and other enterprises are not lacking orders." Zhang Hongbiao, research director of the High-tech LED Industry Research Institute, believes that the reason for the increase in corporate growth is the increasingly fierce price war.

According to the reporter, starting from the beginning of this year, a number of listed companies, including Zhouming Technology and Lianjian Optoelectronics, launched a new round of price wars. At the beginning of this year, the original price of 7,000 yuan per square meter of full-color LED display, the lowest price has dropped to about 2,500 yuan. According to GLII statistics, the average price of domestic LED displays in 2012 decreased by 15%-20% compared with last year.

At the same time, the financial data of several listed companies can also be seen. Data show that as of the end of the third quarter of 2012, the net profit growth rate of both Zhouming Technology and Lianjian Technology were negative, which was negative 34.46% and negative 23.82%. In this regard, Zhouming Technology Financial Report explained that due to the fierce competition in the LED display market, the LED lighting market started slowly, resulting in a decline in the company's net profit.

Especially for small and medium-sized enterprises, the price war means the market space that is constantly being squeezed, and the risk of the capital chain that comes with it. "High-tech LED" has learned that many companies with a revenue of over 100 million yuan have a net profit of less than 20 million yuan, and many of them have a net profit margin of less than 5%.

"In order to continue to survive, companies still have to bite their teeth to cut prices." Chen Weiwen, director of sales at Gewei Optoelectronics, said that many display companies this year began to reduce operating costs from within the company in order to save costs. “At present, most LED display companies compete for more scale, and orders are better than no orders, even if they are relaxed.”

"The big players with financial strength hope to eliminate some small and medium-sized manufacturers through price wars." In Shi Yaozhong's view, with the gradual increase of industrial concentration, good cash flow has become the "understair" of enterprises in the crisis. Tone, it means more chances to survive.

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