[Source: "Engineering LED- lighting market," 12 issue of Reporter / Zhang Geng]
The end of the demographic dividend era
Since last year, a large number of low-end manufacturing companies have moved out of China. According to the report of Daiwa Securities Capital Markets Co., Ltd., preliminary indications indicate that Southeast Asian countries have begun to surpass China as a low-cost manufacturing center. This trend may accelerate in the next few years. China is likely Losing the status of "world factory" in the next 5-10 years.
According to Fitch International, the wage standard for Chinese workers has risen by 87% since 2008; according to current Chinese prices, the wage standard is expected to rise by 46%.
The 18th National Congress of the Communist Party of China proposed that by 2020, the per capita income of urban and rural residents will double from 2010, and the wage level will inevitably increase accordingly. The "Lewis Turning Point" proposed by Nobel Prize-winning economist Lewis, assuming the infinite supply of labor, the turning point of labor from surplus to shortage, refers to the gradual transfer of rural surplus labor to non-agricultural industries in the process of industrialization. The surplus labor force gradually decreased and eventually dried up.
China's ability to become a "world factory" in just two or three decades is directly related to the unlimited supply of cheap labor in China. Under the condition of unlimited supply of labor, labor is lack of bargaining power, and wage levels can remain unchanged for a long time. When the "Lewis Turning Point" appeared, wages began to change from horizontal movement to steep rise. If enterprises follow the original price, they will certainly not be able to recruit workers, especially with high prices, and recruitment is more difficult. Corresponding to this is the end of the "demographic dividend" era.
In addition, the 18th National Congress has made it clear that China will become an innovative country by 2020, which means that government preferential policies will be biased towards technology-based enterprises. With the continuous improvement of labor costs, the extensive enterprises at the low end of the industrial chain Optimizing the upgrade has become a necessity.
The "bottom" fate of the foundry
The "globalization" advocated by the United States is the international division of labor. In the current globalization system, European, American, Japanese and Korean companies occupy a key position in the global industrial division of labor. Other regions are at the low end of the industrial chain, and more participate in globalization in the form of foundry.
In the global division of labor in the LED industry, the United States, Europe, and Japan are still in the upstream of the industry occupying key technologies. American Cree and Osram of Germany master the core technology of LED chips; LED crystals provided by Japan Nichia and Toyota Synthetics are considered to be the best at present, and their LED die production capacity accounts for 80% of Japan.
In addition, LED midstream packaging technology is basically in the hands of Chinese and Taiwanese companies. Domestic LED packaging export enterprises are basically doing OEM work for European and American companies, but foundry companies are the most difficult in the context of globalization.
Today, Europe, the United States and Japan have a set of strict control of the management of the foundry. In general, large enterprises will send a “agent inquiry” to the foundry. In this document, the brand, quality and quantity of raw materials have been specified. Not only that, but related logistics, maintenance, training and employment. There are also clear and clear calculations. Customers pay only to the foundry companies at a higher labor cost. In short, LED package foundry companies earn the difference in labor costs.
As labor costs increase, the profit of LED packaging foundry companies is significantly reduced. The lower the profit, the more it needs to maintain profitability. Therefore, it can only expand production capacity and recruit more employees. This kind of business strategy based on human tactics alone will be steadily pushed by rising prices, labor costs and exchange rate fluctuations.

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