Wire and cable industry must accelerate the merger and reorganization

China's wire and cable industry ranks first in the world in terms of total production value, but the market is seriously oversupplying with excess capacity. From a macro perspective, the rapid growth of China's wire and cable is closely related to China's rapid economic growth. Without the rapid growth of China's economy, China's wire and cable industry will not be able to usher in today's expanding scale in a short time. With the promulgation of the "Twelfth Five-Year Plan", especially in the "12th Five-Year Plan" related industries, electricity, railways, rail transportation, energy, construction, communications, ships, automobiles and other industries will still maintain a large scale of investment. Undoubtedly, the development potential and market capacity of China's wire and cable industry are huge.

According to the State Grid Corporation of China's plan, the pilot phase of smart grid planning is mainly concentrated in 2009 to 2010. During the “Twelfth Five-Year Plan” period, the smart grid officially entered the stage of comprehensive construction, and UHV is the backbone grid of China’s strong smart grid. Therefore, it will also enter the peak of construction. It is estimated that by 2015, China’s total installed capacity will reach 1.436 billion kilowatts, which is an average annual increase of 8% during the 12th Five-Year Plan period.

During the 12th Five-Year Plan period in China, the national grid power grid investment will be close to 2 trillion yuan, and the newly-added power capacity is expected to be close to 400 million kilowatts. This is undoubtedly a good news for China's wire and cable industry. However, according to Albert Einstein's "Theory of Relativity," it is not difficult to find that favorable news is bound to have negative news. In fact, the current domestic wire and cable industry is facing serious internal and external problems. Problems such as overcapacity, low industrial concentration, and disorderly competition have all hindered the development of China's wire and cable industry. The world’s leading dozens of companies continue to invest in China. At present, China’s wire and cable companies have not been able to compete with them. This has made China’s wire and cable industry even more unsettled.

It is well-known that although China's wire and cable industry has surpassed the United States as the world's number one in production, it is not a good thing for China's wire and cable industry. If such an astonishing total output value can be consumed by the market, it will cause serious oversupply if it cannot be consumed, resulting in excess capacity. And because overcapacity will inevitably cause the industry to fall into low-price vicious competition, which will lead to a series of declines in quality and other nepotism. Therefore, how to open up the market, expand the market, and how to enhance their own core competitiveness are urgently needed to think and do in China's wire and cable industry.

In addition, China's 19 largest companies have less than 12% of the market share in China, while more than 400 medium-sized companies only account for less than 40% of the market. The top 10 in the United States has a market share of 67%, the top 6 in Japan has a market share of 65%, and the top 5 in France has a market share of 90%! This difference is by no means normal. With the substantial increase in the price of raw materials, domestic small and medium-sized enterprises have not been able to turn around their funds, resulting in many small or even medium-sized enterprises failing to close down. This has also caused a certain impact on the domestic wire and cable industry.

There are hidden concerns and there are tigers outside, China's wire and cable industry is not only a matter of internal prosperity, external problems can not be underestimated. It is reported that China's nuclear power cable market share of more than 80% was held by the United States cable giant Nexans, and is particularly worrying is that such a share is still expanding. In addition, the 50% share of China's marine cable is held by Nexans, causing great competitive pressure on China's nuclear cable and marine cable manufacturers.

The LS Group from South Korea even aimed at the communications cable market in China and developed China as the main overseas market. Last month, the LS cable was signed with a BYD Daimler joint venture (German Daimler-Benz and China BYD) and will supply 260,000 electric vehicle high-voltage cables to BYD in the next five years. Set, the total amount is as high as 60 million US dollars. BYD ranks among the top 10 automobile manufacturers in China and is the world's largest manufacturer of electric vehicles. This supply behavior undoubtedly laid the foundation for LS to enter the Chinese automobile and electric vehicle market. In addition, the LS cable has also invested more than 3 million U.S. dollars to increase the annual output of automobile cables in Wuxi, Jiangsu Province to 150,000 sets, which has caused severe impact on China's automotive cable manufacturers.

Some related foreign trade experts pointed out that the involvement of foreign counterparts has made China pay a great price. China's copper, petroleum, and ethylene consumption is huge, and therefore it has been condemned by many “excessive consumption of resources”. In fact, China has not received much benefit. This state grid company is also quite helpless, they believe that because the domestic manufacturers do not have the technical advantages, it is usually difficult to win the tender in the State Grid Corporation, so when purchasing high-end products, often forced to choose foreign brands.

At present, in order to make profit less than 20% of the low-end market, more than 4,000 domestic companies are in a tight position, and often miss the high-end market where China's profit is as high as 80%, but it is divided by about 30 global manufacturers. To this end, some large enterprises in China have invested human resources and technical strength in increasing the technological content of products, in order to sharpen their heads into the high-end market of 80%, and become the challengers of foreign manufacturers.

Taken together, the reason why foreign well-known industries can firmly occupy the domestic market, and can also invest a lot of energy to enter the overseas market, the fundamental reason lies in the relatively high maturity of foreign markets, relatively high technological content, product quality Relatively good, thus "forcing" the relevant companies and institutions under comprehensive consideration, can only use the foreign cable products. To this end, China's wire and cable industry should also actively change the form, drawing on the development experience of well-known companies such as global cable giants Nexans, Prysmian, and LS, and actively promote mergers and acquisitions to promote the optimal allocation of resources.

At present, China's wire and cable industry is limited to low industry concentration and lack of technological innovation within the company. Only actively learning from the experience of cable giants such as Nexans, Prysmian, and LS, and actively adopting investment through appropriate transformation and integration of resources. Technology, brand, etc. can be based on the market, and compete with international brands, changing the status of China's wire and cable industry "big but not strong." In order to realize the "big and strong" of China's wire and cable industry, it is necessary not only to firmly occupy the major market share in the country, but also to establish itself in the global market, enter the international market, and compete against the US dollar to win the euro!

However, China's wire and cable companies will face many professional issues in the process of mergers and acquisitions, such as the selection of target companies for mergers and acquisitions, asset valuation of target companies, selection of mergers and acquisitions, selection of financing methods, control of merger and acquisition costs, and mergers and acquisitions. Legal issues, etc. In the face of these problems, it is often difficult to properly deal with the lack of professional talent within the company. Therefore, it is recommended that professional consultants be commissioned to assist. Domestic enterprises should speed up mergers and reorganizations and establish large groups that can compete with international companies.

However, in terms of the significance of mergers and reorganizations, it is well worth the careful consideration of China's wire and cable companies.