China Drying Network News China's manufacturing industry is stepping into the dilemma of “increasing income without increasing profits†or even losing money. Manufacturing companies such as BYD, Foxconn, and Li Ning Group have faced the test of the “profit gateâ€. Market participants expect that the annual profit growth of Chinese manufacturing companies will not exceed 5%.
The BYD, a well-known automobile company, is not satisfied with the "report card" handed over in the capital market. The semi-annual report released by BYD recently showed that in the first half of 2012, the Group's operating income was 22.582 billion yuan, a slight increase of 0.17% over the same period of last year, and the net profit attributable to shareholders of listed companies was 16.269 million yuan, a year-on-year decrease of approximately 90%.
Foxconn, a well-known electronic products manufacturing and processing plant, also encountered a “profit cliffâ€, and its net loss has increased substantially over the same period last year by 13 times. In the first half of the year, the Group’s revenue was US$2.504 billion, a decrease of 16.37% from the same period last year.
Textile and garment manufacturing companies are also facing the "squeaky" of declining performance. The reporter learned from the Guangdong Province Clothing and Apparel Industry Association that in the first half of the year, the profit of Guangdong's nearly 70% textile service companies dropped significantly.
China's manufacturing profits have been affected. The lack of market demand and fierce competition is one of the main reasons. In its announcement, Foxconn stated that the slowdown in Europe and the global economy has caused a turbulent user market and the emergence of new service/application-driven business models, which have triggered major changes in the mobile ecosystem, resulting in customers continuing to protect their market share. In the battle. Although great efforts have been made to attract new customers and streamline operations, the total production capacity has clearly exceeded the demand level. BYD also said that due to factors such as the weak macro environment and weak demand, the Chinese auto industry continued its weak trend last year. In some regions, the auto market has seen negative growth. The competition in the domestic auto market is becoming increasingly fierce, creating a very challenging market structure.
High inventory levels affect the vitality of business operations. Luo Wenbo, deputy general manager of the macro-strategy department of Xiangcai Securities Research Institute, believes that the substantial “diving†of the profits of manufacturing companies is due to the fact that the macroeconomic downturn exceeds expectations. In 2008, due to the impact of economic stimulus policies, the company's production capacity has expanded significantly. Now that the economy is experiencing cold, companies are facing the dual pressures of capacity reduction and inventory inventories. Luo Wenbo said that the annual profit growth of Chinese manufacturing companies will not exceed 5%.
Product homogeneity is also a difficult problem to be solved. Luo Wenbo said that the phenomenon of homogenization is particularly evident in the garment industry with insufficient innovation capacity and the steel industry with overcapacity. According to Li En, vice president of the Guangdong Clothing and Apparel Industry Association, the growth mode of the garment industry in Guangdong is still mainly extensive. Most companies do not have specialized R&D and design agencies, and a large number of companies concentrate on the same process and produce similar products.
Professor Jun-Yan Yang of the School of Finance at Shanghai University of Finance and Economics pointed out that many manufacturing companies lack the ability to innovate, and the “staggered†business philosophy leads to serious product homogenization, which results in excess capacity in the industry and reduced competitiveness of enterprises. "If the goods cannot be sold, once the market is depressed, the company will be in a position of low profits or even losses."
Xie Guogao, deputy director of the Economic and Information Technology Bureau of Foshan City, said that manufacturing companies should gradually follow up on imitations and independent innovation, continuously improve their technologies in production, and increase their technological content and added value.
According to Li En, vice president of the Guangdong Clothing and Apparel Industry Association, the company's core competitiveness lies in its brand and operating model. The top priority for domestic companies is to find out their own personality and core competitiveness, identify their positioning, and tap their own unique brand connotation.
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