Price Wars Sends Indebted Juliang Electric Technology CEO on the Run

News Source: 
Guangzhou Daily

Last Saturday evening, rumors began to surface on Chinese social media platform Weixin that Jiangmen Guojing Opto (國晶光電), a subsidiary of Juliang Electric Technology Group (Juliang), was being pressured by more than 100 suppliers to pay up. Shortly after the incident, suppliers lost contact with Juliang’s CEO, while suppliers formed a barricade around the factory entrance.

Guojing owes suppliers more than RMB 200 million (US $32.48 million), according to statistics provided by LED manufacturers. The company’s overdraft to chip suppliers alone reached RMB 50 million, which including a few second-tier Chinese LED chip suppliers such as ETI and Hualei Optoelectronic. Other pending payments to suppliers also surpassed RMB 10 million.

Many suppliers complained, the massive amount of overdrafts was equivalent to many manufacturers net profits over the last two years. Some manufacturers even revealed it has become the norm for Juliang to delay payments to suppliers, some suppliers have overdrafts have exceeded one year.

The company’s chairman, legal representative and other responsible personnel have gone missing. Even more than 100 company employees have not been paid for months. Police are currently investigating the case, and hopes suppliers can find Juliang’s head and resolve the debt issue soon.

The company’s main business includes LED modules, and LED lighting applications. Industry insiders noted the company’s main business has been lighting package components, and the company’s annual revenue had reached RMB 200 million to 300 million. However, price wars have dragged down Juliang.

Starting in 2012, the LED lighting end market’s low pricing strategies have intensified. At the time some large manufacturers had taken their economics of scale advantages, and initiated the industry’s low pricing strategy. Many manufacturers also pitched in the price slashing competition shortly, Juliang was no exception once it entered the lighting industry. The company’s products were priced 20% lower than competitors on the market.

Some large manufacturers’ advantages are in its R&D capacity, cost control abilities, and have healthier supply chain. Despite having these capacities, Juliang was deeply impacted by a fire incident at the end of 2012.

According to news reports, the fire incident on Nov. 6, 2012 happened on the phosphor powder and die bonding factory located on third story of the company’s office building. Up to 100 square meters of the office was torched by the fire causing three deaths and six injuries. After the incident, the Guangdong Province government began placing emphasis on LED factory safety.

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