The company ventured into the LED lighting business around seven years ago, and shortly thereafter opened a packaging factory to make LED emitters for its lighting fixtures to bring down costs, a savvy measure that has successfully boosted the gross profit margin of its LED-lighting business to over 40%. To further tap such cost-cutting success, the company opened its own epitaxy-wafer factory to make LED chips, estimating it would shave production costs by up to 40-50%.The president of Neo Neon stresses that their strategy is always minimize production costs to quickly gain market share. Investing in fully-integrated LED manufacturing enables them to escape the fate of conventional lighting manufacturers, who are relegated to do exclusively assembly for their operations are dictated by key-component suppliers.
Randy Cheng, general manager of Neo-Neon's Shenzhen branch, says the investment has enabled them to cut costs of LED lights faster than projected. Cheng touts that the group's LED production is much more cost-competitive than rivals' for streamlined production. The chips will be installed in both indoor and outdoor lighting turned out by Neo Neon.The company's LED-lighting sales in 2007 and 2008 have contributed around 50% and 60% of its overall revenues, estimating such sales to further grow 20% this year. Part of such growth is expected to come from contracts, for which the company is vying, from four cities in Guangdong Province, whose total value of some 1.2 billion Chinese yuan is earmarked for LED streetlights.In spite of the company's fast LED sales growth, Fan has become prudent towards LED investments as he says the LED-lighting market is still nascent, adding that new investments in chip-making equipment are temporarily halted until its latest market study is done. Fan, however, still sees bright light at the end of the LED tunnel. "LED is incrementally replacing traditional lights, but it's still too early to say if total replacement is coming. Some manufacturers are just exaggerating," he comments. But so far the numbers don't lie: the company has shipped far more LED Christmas lights, LED stage lights and LED cabinet lights than conventional ones.
The Neo Neon president blames the lack of adequate tech development for the immaturity of the LED-lighting market: inadequate LED luminous efficacy and uniformity simply have not been solved. Fan believes that cost and efficacy determine whether the LED-lighting market can fly. "LED lamps will need average luminosity of 150 l/m and be 80-90% cheaper to compete against traditional counterparts. We believe LED lamps have the potential to take over traditional lighting, but the replacement will not happen tomorrow," he comments.Slow market gains by LED lights have not seriously dimmed the group's sales for its product-diversification strategy, which has helped retain the groups 2008 revenue at US$200 million. However, such encouraging turnover in 2008 pales relative to its 2007 results mainly due to the ongoing financial crisis, soaring commodity prices and labor costs, surging value of the Chinese yuan against greenback, depreciating asset value, and deteriorating business environment.
Randy Cheng, general manager of Neo-Neon's Shenzhen branch, says the investment has enabled them to cut costs of LED lights faster than projected. Cheng touts that the group's LED production is much more cost-competitive than rivals' for streamlined production. The chips will be installed in both indoor and outdoor lighting turned out by Neo Neon.The company's LED-lighting sales in 2007 and 2008 have contributed around 50% and 60% of its overall revenues, estimating such sales to further grow 20% this year. Part of such growth is expected to come from contracts, for which the company is vying, from four cities in Guangdong Province, whose total value of some 1.2 billion Chinese yuan is earmarked for LED streetlights.In spite of the company's fast LED sales growth, Fan has become prudent towards LED investments as he says the LED-lighting market is still nascent, adding that new investments in chip-making equipment are temporarily halted until its latest market study is done. Fan, however, still sees bright light at the end of the LED tunnel. "LED is incrementally replacing traditional lights, but it's still too early to say if total replacement is coming. Some manufacturers are just exaggerating," he comments. But so far the numbers don't lie: the company has shipped far more LED Christmas lights, LED stage lights and LED cabinet lights than conventional ones.
The Neo Neon president blames the lack of adequate tech development for the immaturity of the LED-lighting market: inadequate LED luminous efficacy and uniformity simply have not been solved. Fan believes that cost and efficacy determine whether the LED-lighting market can fly. "LED lamps will need average luminosity of 150 l/m and be 80-90% cheaper to compete against traditional counterparts. We believe LED lamps have the potential to take over traditional lighting, but the replacement will not happen tomorrow," he comments.Slow market gains by LED lights have not seriously dimmed the group's sales for its product-diversification strategy, which has helped retain the groups 2008 revenue at US$200 million. However, such encouraging turnover in 2008 pales relative to its 2007 results mainly due to the ongoing financial crisis, soaring commodity prices and labor costs, surging value of the Chinese yuan against greenback, depreciating asset value, and deteriorating business environment.
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