Ye Hongwei: Reflections on the Survival and Development of Diamond Tools Enterprises

On May 20th, 2016, the three executive directors (expansion) meeting of the 5th China Superhard Materials Association was held in Wuhan New Beacon International Hotel. During the meeting, Ye Hongwei, Chairman of Wuhan Wanbang Laser Diamond Tools Co., Ltd. gave a speech on "Thinking about the survival and development of diamond tool enterprises". (This article is based on the recording, there are some cuts, not confirmed by myself.) The content is as follows:
1. The super-hard material industry is one of the few manufacturing technologies and product performances in China that have reached the international advanced level.
1. The status quo of price difference is determined by many factors such as “market demand” and “enterprise scale”. Low product prices do not mean that production technology is backward and product quality is not good.
2, diamond saw blade is the product, the most important attribute of the product is the use of attributes. Therefore, judging whether a saw blade product is high-end or low-end depends on whether it is sharp enough, safe enough, and wearable. If it is, then this product is high-end, can not be said that it is a low-end product because it is cheap.
3. Domestic companies that make sintered saw blades, such as Antai Steel Research and Jiangsu Fengtai, represent the international advanced level. Due to their long-term focus on a core business area, these companies have formed a very strong core competitiveness, and their products and processes are at the international advanced level. Only by clearly recognizing this, Chinese companies can be confident and better participate in international competition.
4. The level of domestic diamond tool enterprises is uneven. It is not because there are some enterprises with poor competitiveness that they deny the overall level of the industry.
5. At present, domestic enterprises have not yet reached the international advanced level in a few fields such as diamond wire saws.
6. Overall: China's superhard materials industry deserves confidence and pride.

Second, China's diamond tool industry is composed of many small and medium-sized enterprises. There is no comprehensive, comprehensive and powerful large enterprise.
1. China's diamond manufacturing enterprises have already appeared in two or three representative enterprises, but the Chinese diamond tool industry has not yet seen a very strong and comprehensive representative enterprise or group. Basically in a pattern of divisions.
2. If three or four powerful diamond tool industry enterprises or groups can be formed in China, the overall competitiveness of China's diamond tool industry in the international arena can be greatly improved.

Third, the international market: In developed regions and countries, the market structure has been formed and relatively stable; in developing regions and countries, China's products are growing strongly and occupy a dominant position.
1. Overall, the markets of developed countries and regions are relatively saturated, and the market structure is relatively stable.
2. In developing countries and regions, Chinese companies are able to obtain better profits and grow into brands.

Fourth, the domestic market
1. After 2015, the Chinese economy entered a new normal. The domestic market has been transformed from a process of rapid development to a process of “slightly stable” or “returned development”. However, in some advanced fields, it continues to maintain "fast growth."
2. Under the above circumstances, product structural adjustment will follow, and some backward enterprises will shrink or even die.

V. Market diversification and internationalization
1. More and more Chinese companies are moving into the international market. At the same time, export-oriented companies are also spending more energy on the domestic market.
2. Domestic diamond tool companies set up sales companies and production bases abroad, and cases of mergers and acquisitions of overseas companies have emerged. This fully demonstrates that there are more and more domestic powerful enterprises and more involved in international competition.

Sixth, brand cultivation: two ways of brand strategy: "shipbuilding" and "borrowing"
1. The so-called "shipbuilding" is to cultivate the brand independently, and "borrowing the ship" is to merge or purchase foreign brands.
2. At present, in the markets of developed countries and regions, it is more difficult to carry out brand cultivation by means of shipbuilding. Because cultivating brands requires close customers, it also requires a long time and huge capital investment. Most of our domestic enterprises do not have such advantages.
3. In addition, the added value of the product also determines whether domestic enterprises have the opportunity to cultivate brands (large-scale advertising).
4. At present, the examples of domestic enterprises' mergers and reorganizations of international enterprises have appeared on a large scale. This is because domestic enterprises need the brands and channels of international enterprises.
5. At the moment, there are still many opportunities for such mergers and acquisitions in the international arena. The cost of mergers and acquisitions and restructuring may be low, but it is necessary to provide effective resources for the integration of mergers and acquisitions, and to continue to inject new vitality into them.

7. The impact of the Internet on traditional business models is an important opportunity for brand cultivation.
1. Two characteristics of the Internet business model: one is flat and the other is personalized;
2. After the emergence of the Internet model, it is an economical and practical way for domestic enterprises to establish brands and cultivate brands in developed countries and regions. We need to pay attention to them;
3. Because of the increase in labor costs and management costs of domestic enterprises, it is unrealistically emphasized that personalization will affect the profit level of enterprises;
4. Enterprises can consider the development path of “standardization--intelligence--"customized customization" to achieve overtaking in corners;
5. Pay attention to the Internet model but don't be completely superstitious.

Eight, price competition: price competition is a double-edged sword, one enemy, one thousand, self-damage eight hundred
1. Nowadays, more and more domestic enterprises are beginning to enter the international market, and price competition is one of the effective magic weapons. Price competition has a great effect before the market has formed a stable pattern; but once the market structure is formed, the effectiveness of price competition begins to decline.
2. In the case of limited market demand growth, abuse of price competition may cause the entire industry to enter a difficult situation.
3, each product should have a fixed gross profit margin, if "price competition" can not bring huge sales increments to the company, this is a disadvantage to the people.
4. In the case of constant market demand, the decline in product prices will result in a decline in the total industry. The decline in the total industry will affect all aspects of the industry, and no one can be alone.
5, price competition This double-edged sword must be used with caution.

Nine, technological progress and production automation
1. Technological progress constantly changes people's perceptions, and production automation is the only channel.
2. The first step in innovation and technological progress is to achieve “concept breakthroughs”.
3. In the near future, new products that constantly break through old ideas will appear more and more.

X. Survival and development: sailing against the water, not going back
1. Continuous R&D investment and innovation can stand in an invincible position in the market competition.
2. The diamond tool industry has entered a period of stable development from a period of rapid development. After reaching the stabilization period, the total demand of the market will be in a stable range. In the case of this market demand increase is limited, the requirements for survival and development are consistent for enterprises. If they do not develop, there is no way to survive. Every enterprise must have a sense of crisis.
3. As long as there is excess capacity, the industry will not stop price competition. The decline in the price of traditional products is an inevitable trend. Therefore, if enterprises want to survive and develop, they must develop new products and expand new fields.

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