▲The global lighting industry and lighting market are constantly changing. The photo shows the site of'Light+Building 2018'. (Photo courtesy of Messe Frankfurt) © World Lighting News.

 

Written by : Jung-Bae Kim. Publisher & Editor. Lighting Critic.

'Light + Building (Frankfurt International Lighting Exhibition)' is the world's largest, world's best, international lighting exhibition recognized by its own company. More than 2,700 companies participated in this year's exhibition, competing fiercely to secure buyers.

 

However, it was a general comment that “this year's exhibition showed fewer exhibits of new technologies and new products than in previous years.” If so, why? Let's look at the'uncomfortable truth' behind the decline of new technology and new products in'Ligt+Building 2018'.
 
Both you and I run OEMs or run factories in China
The technology is similar, the product is similar, there is no “differentiation”
Companies are heading towards the last remaining “price competition”
 
The'CES (Consumer Electronics Show)' held every January in Las Vegas, Nevada, is evaluated as the

world's most important consumer electronics show.

Meanwhile, the'MWC (Mobile World Congress') held every February in Barcelona, ​​Spain is considered one of the most important exhibitions and conferences in the field of electronics and information

communication.
 
So, what is the most important exhibition in the lighting field? The answer is simple. This is because

'Ligh+Building', which is held every two years in Frankfurt, Germany, is the exhibition.
 
Known in the domestic lighting industry as the “Frankfurt International Lighting Exhibition”, this

exhibition has a very long history. The root of this exhibition is the “Hannover International Lighting

Exhibition” held in Hannover, Germany every April from 1947 to 1999.
 
However, when Hanover Messe, who hosted this exhibition, abandoned the'Lighting Exhibition' to

further expand the scale of the exhibition in the electrical and electronic sector, Germany's largest

exhibitor, Messe Frankfurt, brought this'Lighting Exhibition' and started opening it in April 2000 This

is'Light + Building (Frankfurt International Lighting Exhibition)'.
 
The reason why this exhibition is called'the world's largest and best lighting exhibition' is because the number of participating companies is close to 2800. Furthermore, the level of exhibitors is literally

“the best in the world”.
 
For example, Cree of the US, LumiLED, Seoul Semiconductor of Korea, Samsung Electronics, and LG,

which showed prominence after the appearance of LED lighting in'Big3' of traditional lighting such as Philips, Osram, and GE. From display to China's Opple, companies that dominate the lighting industry and lighting market in the world are participating in this exhibition.
 
The same is true when looking at the national level. Taking Korea as an example, Samsung

Electronics, LG Display, Seoul Semiconductor, Maltani, Phillux, Alto, Dongmyeong Electric, and Lumens were listed as participating companies in this year's'Light+Building 2018'. They are “national-level”

companies that can be said to represent the Korean lighting industry. This situation is the same in

other countries. This is the reason why “Light+Building” is referred to as the “World Lighting Olympic Games”.
 
◆ 'New phenomenon' in 'Light+Building 2018'

However, this'Light+Building' exhibition showed'abnormality' this year. First of all, the number of new products among the products presented by the companies participating in the exhibition has

significantly decreased. Products that differentiate them from other companies' products have also

decreased.
 
Instead, there was one thing in common. It is said that many of the products exhibited by the

exhibitors at the exhibition booth are “made in China”.
 
For example, during conversations with company officials after visiting companies that have booths in exhibition hall 6.2, the most frequently heard are “The products exhibited by Company A are mostly OEM products made in China” or “Products exhibited by Company B. Is a product imported from

China.”
 
Combining these points leads to a conclusion. It is at least 6.2 based on companies that have booths in the exhibition hall, "It is'very' difficult to find companies that have participated in the exhibition

with products produced in their own companies, with their own technology, and in their own

countries."
 
This phenomenon can be said to be the result of steadily increasing the share of imports of products produced by OEM methods in China or finished products made in China by global lighting

companies over the past 20 years (Korea Lighting Newspaper, April 2, 2018, No. 359 3). Page

planning and analysis article)
 
As a result, the quantity of Chinese OEMs and imported lighting products supplied to the lighting

market in each country has increased tremendously. In the US, more than 60% of all lighting products imported as of 2016 were made in China.
 
This situation is not very different in terms of export markets. It was difficult to find any lighting

companies in the US and Europe that participated in the '2018 Hong Kong Autumn International

Lighting Exhibition' held in October 2017 that produced products in their own countries.
 
Although most companies developed technology, products, and designs in their own countries,

production of products was often done in China or Taiwan. However, if there is a difference, whether

it is OEM production, a joint venture to establish a factory in China, or a 100% investment to establish an own factory in China, it was about.
 
This reality can be said to be a form of the world's lighting companies using China as their

production base, and then getting caught upside down by China. If you increase the proportion of

dependence on the other person for something, later on, the other person will have more power. This is exactly the situation between lighting companies around the world and local OEM companies in

China.
 
◆ 'World lighting companies' and '4 traps'

So, how do you interpret this situation? To answer these questions, the reporter conducted a direct

interview to reporters from all over the world to cover'Light+Building 2018'.
 
The target audience is reporters from various foreign media such as construction, architecture,

interior, electricity, etc. who meet during the'Happy Hour', a'time for reporters' held at the press

center from 5:30 pm every day during the exhibition period. I decided to randomly choose among

them.
 
As a result, it was revealed that reporters from various countries have very similar perceptions of the

current situation in the global lighting industry and lighting market.
 
To summarize the opinions of foreign reporters interviewed by the reporter in one word, it becomes

that "the world's lighting industry and lighting companies are currently falling into'four traps'."
 
The ‘four traps’ are ▲the trap of China ▲the trap that there is no technology ▲the trap that the

product has been leveled ▲the trap that there is no choice but to compete in price with low-priced

products
 
◆ Trap #1 : Production in China

First,'China's trap' means, as pointed out above, "any country or company makes products in China."
Reporters' attention in this section is'Chinese OEM production', which started to lower the production cost of lighting products ▲Establishment of a local factory in China through joint ventures withChinese companies ▲Establishment of a local factory in China through 100% independent investment It is a fact that it is becoming more and more'escalated'.
 
In this way, the advantage of the OEM of “outsourcing production when necessary, and outsourcing

production when necessary” gradually disappears as the establishment and production of local

factories in China are increased. Instead, costs and administrative burdens such as higher labor costs and higher management costs at Chinese factories increase. When this happens, foreign companies

that have set up factories in China are increasingly trapped in China.
 
On the other hand, Chinese lighting companies have begun to cope with the rising labor and

management costs by setting up factories in Vietnam, Laos, Indonesia, and Malaysia, or by increasing OEM production.
 
Overseas lighting companies are operating factories in China, and Chinese companies are going to

run factories in neighboring countries where wages are cheaper than China.
 
◆ The 2nd Trap : Leveling Technology

Second, the “trap of lack of technology” means that ① as LED lighting technology develops, it is no

longer difficult to develop innovative technologies, and ② as the technology of Chinese lighting

companies rapidly increases, the difference with foreign companies has almost disappeared.
 
This leveling of technology means that it will be difficult to differentiate from other companies with

tolerable technology in the future, and that Chinese lighting companies have become real

competitors that threaten foreign companies.
 
◆ The third trap : product leveling

Third, “the product has been leveled” is the same as the result of the first and second traps. In the

same place in China, making products with similar technologies made it difficult to'differentiate

products'.
 
If'product differentiation' is not achieved, there is only one way left for lighting companies. It is

competing only for'price'. This situation leads to the fourth trap.
 
◆ The Fourth Trap : Price Competition

Fourth, the trap of ‘compete on price with low-priced products’ is a comprehensive version of traps

1~3. It means that it is not differentiated by production location, technology, and product, so it has

no choice but to compete with price, the last remaining competitive factor.
 
However, there are various risks lurking in “price competition”. First of all, when there is a “price

competition,” sales and profits decrease. To compete on price, you must first find a way to lower

prices.
 
However, there are three ways a company can lower the price of a product. The first is to improve

productivity. It means producing more products with the same cost, the same time, and the same

manpower.
 
However, improving productivity is not as easy as saying. If it requires long-term preparation and

effort. If you want to increase productivity by automating production facilities or replacing them with new facilities, you will have to invest enormous amounts of money. Since such facility investment

leads to an increase in cost, it may offset the effect of productivity improvement in the short term. As such, the risk burden that companies have to bear is also increased.
 
An easier way to improve productivity is to lower the product's performance or quality. For example,

reducing the number of parts in a product or replacing parts with cheaper products.
 
This can lower the price of the product. However, there is a high possibility that problems may arise

in terms of product performance, quality and life. In the long run, it is risky for companies to lower

the price of their products in this way. When the performance and quality decrease, the buyer's

evaluation of the product decreases, and the price offered by the buyer decreases. If it goes wrong,

the company is stigmatized as a company that makes low-quality products, and the company's

reputation is deteriorated and its position in the market becomes unstable.The third way to lower the price of a product is to reduce profits.
 
For example, if you have been making a profit of 10,000 dollar per product so far, you can reduce it

to 5,000 dollar. This method is an easy way to lower the price of the product. However, in order to

reduce profits in this way, sales volume must increase as much as profits are reduced.
 
If profits are reduced but sales volume does not increase at all, a decrease in sales and a decrease in profits occur at the same time, leading the company to a difficult situation. The situation in which the original purpose of lowering product prices is not achieved, only product prices are lowered, and

even sales and profits decrease is literally a nightmare for companies.
 
From the standpoint of companies, there is the best way to cut product prices. That's a way to

drastically increase sales and lower the cost of production per product. This method lowers the price of the product by taking advantage of the reduction in fixed costs that occur when sales volume

increases. However, the question is how to increase the sales volume of the product.
 
Competing for'price' is very difficult for companies when considering various points comprehensively. Also, it is common for one company to lower the price of a product and the competitors to lower it

accordingly. As such, the effect of price competition is limited, and the result of a decrease in profits

from price competition is too great.
 
Nevertheless, the reason why lighting companies around the world are going on the road to price

competition is that there is no way to outperform competitors other than that. However, the damage caused by price competition is too great.
 
If prices are cut but sales do not increase significantly, companies will fall into a vicious cycle of

lowering product prices → decreased sales → decreased profits → worsening management →

reduced investment in technology and product development → lack of new technology and new

products → decreased sales again. This'vicious cycle' continues until the company collapses, and ends when the company goes bankrupt.
 
However, if it is the result of this'vicious cycle', the decrease in new technology and new products of exhibitors in this'Light+Building 2018', it is very worrisome and serious. This is because the world's

lighting industry and lighting companies are going to a stage where they are losing their ability to

develop new technology new products due to decreased sales and profits.
 
◆ Where are the world's lighting companies going?

In this'Light+Building 2018' exhibition, the reporter's'coverage for 50 reporters from all over the

world' is probably the first large-scale'reporter face-to-face coverage' in the history of the world

lighting industry. It wouldn't be too much to say.
 
However, as a result, the reporter was able to consolidate the views of “international journalists” on

the current status of the lighting industry in each country and the reality of the global lighting

industry and lighting market.
 
In addition, I was able to cultivate a little more insight into how to look at the'Jeong Jung-dong's

competition' between the global lighting industry, the lighting market, and lighting companies.
 
Perhaps in the future, the world's lighting industry and market will be constantly changing. Many

lighting companies will be born and disappear. Yesterday's strong person becomes the weak today,

or yesterday's weak person becomes the strong today.
 
However, it is clear that the lighting industry and the lighting market itself will last forever. In today's global lighting industry and lighting market, where everything is uncertain and opaque, this is the

only thing that is so obvious. And the path that the world's lighting companies should use as a

compass may also be hidden in these words.

 

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