Op Lighting is a comprehensive lighting enterprise integrating R&D, production and sales. From 2011 to 2013, Op Lighting’s operating revenue was 2.687 billion yuan, 3.138 billion yuan, and 3.390 billion yuan. The compound growth rate is 13.08%; net profits are 149 million yuan, 429 million yuan, and 479 million yuan respectively, and the net profit compound growth rate is 60.73%. Currently, Opple Lighting's sales revenue and net profit scale rank among the top three in the domestic industry.
However, due to the rapid cooling of the real estate market this year, home lighting fixtures, the company's traditional advantage products, are facing the risk of significant market shrinkage. The LED lighting field, where the funds raised this time are mainly invested, is also full of chaos, fierce price wars, and industry profitability has declined.
Op Lighting plans to issue no more than 58 million shares this time. 230 million yuan of the funds raised will be used for the construction of LED production projects and 470 million yuan for the construction of marketing network.
As an emerging green and environmentally friendly industry, LED has a low threshold. In the past two years, the entire industry has also experienced intensive and substantial expansion. The industry is worried that LED may become the next photovoltaic. "After several rounds of production capacity expansion, in terms of upstream LED chips alone, the total production capacity of domestic companies has accounted for more than 60% of the world's total." said an executive of a domestic listed company.
Op Lighting believes in its prospectus that the LED lighting industry is currently facing three major risks: industrial upgrading, market irregularities, and difficult production management. If it cannot launch more attractive products to seize the market and lead its competitors in product research and development, its market share will face the risk of decline.
In addition, due to the low entry barriers, many small lighting companies use low-price and low-quality strategies to seize the market, causing an impact on large companies like Opple Lighting.
It is not difficult to see from the 2013 annual reports of large listed lighting companies that the above-mentioned impact is taking place. Qinshang Optoelectronics is currently the only company with LED lighting fixtures as its main business. Its net profit in 2013 was 103 million yuan, a year-on-year decrease of 1.17%. Qinshang Optoelectronics explained that there are currently a large number of companies in the LED lighting industry and market competition is becoming increasingly fierce. With the growth rate of production capacity exceeding market demand, the sales unit price of LED lighting products has declined, and the overall profitability of the industry has declined.
The 2013 mid-term report of NVC Lighting, another listed company, shows that due to the fierce price war in the LED market, the gross profit margin of its LED products is 16.4%, but the gross profit margin of some traditional products, such as T4\T5 brackets, is 34.9%, and the gross profit margin of HID light sources is 59.9%.
In addition, China Net financial reporters found that Opple Lighting’s products mainly focus on home lighting fixtures, and its share of total revenue is also increasing year by year. From 2011 to 2013, home lighting products accounted for 37.61%, 37.66%, and 43.52% of total revenue respectively. Due to the high gross profit margin of home lighting products, Opple Lighting's gross profit margin is more than 10 percentage points higher than that of the same industry. Data show that in 2013, the gross profit margin of Opple Lighting's main business was 37.88%, while the industry average was 21.13%.
However, there are hidden worries behind the high gross profit margin. The sales of home lighting fixtures rely heavily on the home decoration market and are therefore greatly affected by the real estate boom.
According to data from the National Bureau of Statistics, from January to March, the sales volume and price of commercial housing nationwide fell. In April, the transaction area of new commercial residential buildings in 30 typical cities was 12.66 million square meters, a decrease of 4.7% month-on-month and a year-on-year decrease of 21.0%. The latest research report published by Morgan Stanley stated that the mainland property market is expected to experience deterioration in sales and average selling prices in the next few months. The rapid cooling of the real estate market is bound to affect the market demand of the furniture and lighting industry.
In addition to the huge uncertainty in the future market of major products, Opple Lighting product quality issues are also a stumbling block that hinders the launch of the product.
According to a 2013 report by Beijing Business Daily, during the three years from 2010 to 2012, Opple Lighting was exposed to product substandard quality at least four times during random inspections by relevant departments in various places. Industry insiders believe that the large-scale outsourcing of production in the lighting industry is the main reason for serious quality problems in the lighting industry. In 2012, the Guangdong Provincial Quality Supervision Bureau randomly inspected self-ballasted LED lamp products and found that the discovery rate of substandard products was as high as 73.9%.
The Opple Lighting prospectus explained that “due to the wide range of the company’s products, some products are produced through OEM (commonly known as OEM), and the sales scope is also expanding, individual products may be affected by product process design, electronic component compatibility, product transportation, Quality problems may arise due to installation and use environment, improper use by consumers, etc. "
Zhang Shanduan, deputy director of the Electric Light Source Research Institute of Fudan University, said that there is nothing wrong with OEM itself, but OEM may cause problems in the company's control of the OEM. For large companies like Opple Lighting, for small order quantities and a wide variety of products, due to economies of scale, the company's qualifications cannot achieve mass production, so they generally use OEM methods.
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