Kingsun Optoelectronics acts as price butcher, suspected of selling at a loss to disrupt LED market

On June 10, Dongguan Kingsun Optoelectronics Co., Ltd. announced a trading suspension and held the "Kingsun Optoelectronics 'Lighting Replacement' Wealth Creation Plan and New Product Launch" at the Guangzhou Import and Export Fair Exhibition Hall, high-profile announcing it would partner with engineering contractors to seize the trillion-yuan lighting replacement market. On the evening of June 17, Kingsun Optoelectronics announced that Chairman Li Xuliang, Vice Chairman Huang Guanzhi, Director Liang Jincheng, and Deputy General Manager Zhu Bingzhong had all resigned for personal reasons on June 16. This "earthquake" personnel change triggered widespread speculation in the industry. Reporters tried multiple times to contact Kingsun Board Secretary Duan Zhu, but his mobile phone remained off and the board office never responded.

On June 17, a Weibo-verified commentator "Commentary Yang Tao" made an exclusive disclosure, claiming that behind the collective resignation of Kingsun Optoelectronics executives there are unspeakable secrets, that Kingsun LED streetlights have been pushed to the market at ultra-low prices, and that the executives are about to clear inventory and run away. On the evening of June 18, the whistleblower updated his Weibo saying that someone close to Kingsun relayed that they hoped he would delete the post, otherwise legal means would be used to protect their rights. The whistleblower further claimed that Kingsun was plotting to push LED streetlights to the market at over 4 yuan per watt and indoor lighting products at less than 1 yuan per watt to solve the market predicament, preparing to run away at any time. Weibo kept revealing "new information", sparking widespread discussion among industry insiders. The true intentions behind the fog of Kingsun executives' collective resignation are hard to grasp.

The news disclosed by the whistleblower "Commentator Yang Tao" that Kingsun is engaging in low-price dumping has indeed sparked speculation within the industry. To verify the authenticity of the disclosure, the reporter contacted multiple industry experts for confirmation, attempting to understand their analysis and views on Kingsun's alleged low-price dumping to seize market share, and also consulted them for information on relevant LED product prices. However, most of the responses received were "It is not convenient to comment on this matter at the moment." While most industry experts remained tight-lipped on the matter, the reporter contacted multiple persons in charge of LED manufacturing enterprises within the industry to verify some information.

Regarding the authenticity of the disclosure, we may first assume it to be true and then conduct a reverse calculation to see whether companies in the industry can lower their prices to such a level while ensuring product quality. Regarding the alleged dumping of Kingsun LED indoor lighting products at 1 yuan per watt, the reporter verified the information. According to Mr. Luo, the person in charge of a LED enterprise in Jiangxi, which claims to be the largest LED production base in the central region and even nationwide, achieving a price of nearly 1 yuan per watt for indoor lighting products has now become a reality in the industry. The company launched a 9W LED bulb with a national unified retail price of 9.9 yuan at this year's Guangya Exhibition. Based on this price calculation, achieving 1 yuan per watt for LED indoor lighting products may not necessarily result in a loss, and with scale advantages, it may emerge victorious. Regarding this price, the reporter also received confirmation from Mr. Lin, the person in charge of an enterprise in Zhongshan, Guangdong, who is known in the industry as the "price butcher." From this, it can be inferred that Kingsun, with 17 years of LED production and R&D experience in the industry, even if it can achieve 1 yuan per watt for LED indoor lighting products, has relatively high R&D costs and would essentially be unable to avoid "operating at a loss."

Currently, the most controversial price is that of LED streetlights at slightly over 4 yuan per watt. The reporter received confirmation from persons in charge of product R&D at multiple companies in the industry that achieving a price of 4 yuan per watt for LED streetlights is basically unlikely. As understood, the mainstream price of outdoor streetlights from other well-known brands in the market is above 9-12 yuan/W, while the cost of lower-end products in terms of materials and accessories can be reduced but must still be maintained at the 7-8 yuan/W range. A R&D manager surnamed Wu listed for the reporter the basic costs of the main components of LED streetlights, excluding other accessories, labor, and marketing costs, with a minimum of over 6 yuan. Although Kingsun is well known in the industry for outdoor lighting products, particularly streetlights, and bears the moniker "King of Streetlights," even if it does an excellent job in controlling the procurement of streetlight-related raw materials and production management costs, it is difficult to ensure that costs can be reduced below 4 yuan per watt. "Although the current LED lighting industry is developing rapidly in technology, with prices dropping by 20%–30% annually, I do not believe the price has fallen to 4 yuan per watt for LED streetlights. Unless a revolutionary new technology is applied to the LED streetlight structure, Kingsun would lose at least 3 yuan per watt," an unnamed industry expert stated.

"If the price really has to be at this level, quality would not be guaranteed," said Mr. Yang, who runs an LED business in Guzhen, Zhongshan. "But the quality of Kingsun's products has always been well assured; it is impossible to sacrifice quality for the sake of low prices, otherwise the loss to the brand cannot be measured in monetary terms." Based on the statements of these industry insiders, the price of 4 yuan per watt for Kingsun claimed in the disclosure is considered unlikely by many in the industry. So is what the whistleblower said true, or is Kingsun willing to adopt such a loss-making strategy to disrupt and seize the market? The fog surrounding the disclosure grows ever thicker.

　　Why is Kingsun so "crazy"?

　　Let's set aside the authenticity of the whistleblower for now and take a look. If the whistleblower's revelations are true, let's analyze why Kingsun is so "crazy," using methods that don't make money and may even lose money to seize the market. According to industry insiders familiar with Kingsun, this move is nothing more than wanting to suppress competitors with low prices and achieve the goal of forcing them out. According to the whistleblower, after Li Xuliang and three other executives collectively resigned for personal reasons, the new executive team was eager to prove themselves and implemented a market strategy of selling at a loss, aiming to knock down more than half of the competing enterprises and thus monopolize the market.

　　As a well-known listed company in the industry, why is Kingsun so "crazy"? Would it really brazenly violate fair competition regulations and disrupt market order with low prices? Some industry insiders speculate that this is a crazy path chosen by Kingsun executives under pressure from performance growth and other pressures, preparing to collectively cash out and run away; others believe this is a "setup"; still others believe this is a strategy implemented by Kingsun for capital operations... Various speculations make the fog of Kingsun executives' collective resignation so thick that it cannot be dispersed.

　　Others have conducted in-depth analysis of Kingsun's behavior, believing it is inseparable from the personality of Kingsun's leader, Li Xuliang. Combined with various negative news that broke out before and after Kingsun's listing, such as the listing valuation adjustment agreement with investment institutions, the perfunctory press conference after several executives were fined 400,000 by the Securities Regulatory Bureau some time ago, and the impressions of Li Xuliang's "gambler's mentality" when various media interviewed him. The whistleblower exposing such low-price dumping happening to Li Xuliang would not be too surprising to most industry insiders. If the revelations are true, then the real reason for Kingsun's madness really needs Li Xuliang himself to explain.

　　How powerful is Kingsun's bombshell?

If the revelations are true, how much impact would Qinshang's large-scale low-price dumping have? Industry insiders say that Qinshang has always made bold moves, and this could be one of its strategies. Among listed LED companies, Qinshang alone has more than 1.7 billion yuan in cash on its books. By playing the role of "price butcher" this time, is Qinshang trying to use the money lost as advertising expenses to attract distributors, eliminate other competitors, and thereby monopolize the market? If Qinshang really does dump at such prices, very few companies in the industry could long withstand such a "fierce attack." However, such low-price dumping requires capital to maintain — it is no different from "killing a thousand enemies while losing eight hundred of your own."

An unnamed industry expert pointed out that, even though Qinshang knows it is operating at a loss, it still goes ahead — that makes it the "bad kid" of the LED industry. For the ecosystem of the LED industry, this is absolutely a major massacre, which will accelerate the reshuffle of the industry.

What is even more interesting is that, on the afternoon of the 20th, the whistleblower posted another message on Weibo demanding that Qinshang's Deputy General Manager come forward to explain. The Weibo post read: "[Zhu Bingzhong dodges the topic; something major must be happening at Qinshang Optoelectronics] Following this blog's revelation that Qinshang Optoelectronics intends to cleanse the market with LED streetlights at 4 yuan per watt and indoor LED lighting below 1 yuan per watt, Qinshang's Deputy General Manager Zhu Bingzhong said in an interview with a media outlet, 'No need to guess wildly.' We strongly demand that Mr. Zhu come forward and respond: Is the low-price dumping a fact? Do you dare not admit to your strategy? Why are you hiding this from consumers?"

In order to verify the doubts raised by "Commentator Yang Tao" regarding the Qinshang incident, the reporter continued to contact Li Xuliang multiple times without success. The reporter will continue to follow the progress of the incident.