Scope of acquisition covers entire industry chain
Statistics complied show the industry’s M&As involve the entire supply chain from upstream material and chip makers all way to downstream end product manufacturers. Broken down into supply chain sectors, there have been seven LED chip and sapphire acquisitions, 11 LED package mergers, and 19 LED display and lighting M&As in 2015. Downstream manufacturers comprised the largest group of mergers, amounting to 51.35% of M&As.
Additionally, the importance of patents is becoming increasingly visible. International manufacturers have started to spin off their LED businesses, and more Chinese companies are grabbing global lighting companies LED businesses to expand their patent portfolio. This has been observed through Go Scale Capital’s acquisition of Lumileds, China Electronics Corporation (CEC) subsidiary Kaistar’s acquisition of Bridgelux and others.
Maturing financial integration and cross-industry acquisitions becomes new norm
LED display manufacturers started their entry into LED lighting industry in 2012, mostly through M&As. This form of business model has become very common in 2015, such as Ledman acquisition of Torshare, Leyard’s merger with LEDavenue, Aoto Electronics merge with Gold Lamp and others. These acquisitions indicate LED display manufacturers have not given up on obtaining LED lighting market shares Following maturing capital integration, LED manufacturers are no longer satisfied with just the LED lighting market, many of the M&As now involve IoT or Internet companies, advertisement and sports companies. These have all become the altest arsenals in the LED industry, for instance Liantronics acquisition of an advertisement company, and Ledman’s investment in Swiss Media Infront Sports.
M&As still popular among manufacturers despite high financial and industry supply chain integration requirements
In the past the industry supply chain integration has leaned towards the formation of alliances between two big manufacturers, but the maturing LED industry market has now spurred coalition between multiple parties. The new partnership models prefers connecting upstream and downstream clients. Integration of suppliers has also become highly desirable. For instance Guangdong Rising Assets Management (GRAM) investment in Foshan Lighting this year has been interpreted by industry specialists as the integration of GRAM finances with Nationstar R&D capacity, and Foshan Lighting’s distribution channel. Kaistar’s acquisition of Bridgelux, followed by MLS’s investment in Kaistar is also viewed as a classical example of joint partnerships between large manufacturers in the different segments of the supply chain.
Manufacturers relying on M&As to improve financial performance
Due to intensifying competition in the LED industry, more than 40% of Chinese LED manufacturers’ annual revenue performance declined in 3Q15. However, 60% of Chinese manufacturers’ revenue performance grew through consolidating revenue from newly acquired companies, for instance Changfang Lighting combined Kamisafe revenue in April 2015, Leyard consolidated Leafun revenue in July this year, and in August it went on to add Glux financial report. LianTronics also reported it integrated Time Share Media’s revenue in May, while Utop and Eastar revenues were consolidated in March 2015.