The LED lighting industry is welcoming new opportunities such as smart lighting and optical communications, but European giants such as Philips and Siemens are fading out.
Philips and Siemens are the oldest lamp manufacturers in Europe. Their lamp business has a history of more than 100 years. Lighting was one of their leading businesses. Philips became one of the largest carbon filament lamp manufacturers in Europe in the late 19th and early 20th centuries. In 1919, Siemens and the other two companies jointly established OSRAM Bulbs.
In the era of incandescent lamps, European and American companies such as Philips, Osram, GE, etc., were all-powerful. However, with the popularization of LED lighting, the technical route has been completely transformed, and the traditional patent giants’ technology patent barriers have collapsed. Asian companies, including Chinese companies, have rapidly emerged with their industrial chain and cost advantages. The revenue growth of Philips and OSRAM’s lighting business decreased, and profits became thin.
Seeing the intense competition in the consumer electronics field, Siemens and Philips began a strategic transformation a few years ago. In 2014, Siemens released its 2020 vision for the company and will focus on electrification, automation and digitization in the future. Philips continues to drive the transformation of the company into a leader in the field of health technology.
Since the lighting business accounted for a relatively small portion of their overall profits, they chose to make the lighting business “single flight.” In July 2013, Siemens split OSRAM to go public. In the second half of 2014, Philips merged the LED chips with the Automotive Lighting Division and established it as an independent subsidiary. The new company was named Lumileds.
The “independent” Philips and Osram lighting businesses have become the targets pursued by Chinese companies. In 2015, Philips had planned to sell 80.1% of Lumileds’ shares to the Chinese consortium, which was later terminated by the US Foreign Investment Commission’s block. In May 2016, Philips spin-off Philips Lighting was separately listed.
In July 2016, OSRAM sold its LEDVANCE company responsible for the lighting business to Mullinson and its strategic partners. At the end of 2017, China’s LED chip leader Sanan Optoelectronics and a Chinese-funded conglomerate with a background in Jinsha River Venture Capital would like to take over the 17.34% stake in Osram Lighting held by Siemens, but German economic ministers have expressed their opposition.
“Chinese companies are taking the path of internationalization. In the future, the competition in the overseas market will be unavoidable with Philips and OSRAM.” Zhang Hongbiao, a senior analyst in the LED lighting industry, believes.
All these factors have led to the optimistic expectations of the lighting industry, “retreat into China”.
In fact, Siemens, Philips fade out of the lighting industry, does not mean that Osram, Philips Lighting has no future. On the contrary, after their “single flight”, they are speeding up the deployment of emerging fields such as smart lighting and optical communications. OSRAM announced its LED, laser and photo-electric sensing solutions with autopilot at 2018CES, and is one of the leading suppliers of iris-unlocking related sensors for smartphones. Philips Lighting announced the smart lighting IoT platform at the Lighting Fair in Frankfurt, Germany, last week. For the first time, it exhibited the Visible Light Communication (LiFi) technology, which can transmit multiple high-definition movies while making video calls.
Light, formerly used only for lighting, can be used for wireless communication in the future, sensing distance, applied to intelligent driving, and information transmission, becoming an entrance to smart cities, and even used to cultivate crops and adjust patient moods. Therefore, after diluting the traditional lighting business and entrusting more LED lighting business to Chinese companies, OSRAM and Philips Lighting, which will soon be renamed Signify, are all exploring the future of light, exploiting the high levels of LED chips and LED lighting. In the field of value, it provides a full range of service solutions for smart lighting.
From the perspective of scale, after “Solofly”, Philips Lighting generated revenue of Euro 6.965 billion in 2017. Osram’s revenue for fiscal year 2017 was 4 billion Euros, which is an annual revenue of 30 billion to 50 billion Yuan. In contrast, the leading companies in China’s lighting industry have grown rapidly, but their body mass is still small. Sanan Optoelectronics, Mulinsen, Op Lighting, NVC Lighting, and Sanxi Aurora are all working toward the goal of 10 billion yuan. Obviously, regardless of revenue, profit scale, brand influence, and technology accumulation, there is still a clear gap between China’s lighting companies and multinational lighting giants.