Source: HC LED screen network

In the twinkling of an eye, 2016 has reached the midsummer, and China's manufacturing industry, which has not yet fully recovered from the cold winter, is still precarious. For the LED industry, this year is undoubtedly a very cruel year. Even in the first quarter of the exam, many LED companies handed over a beautiful report card, but the "curse" of shrinking gross profit and declining net profit has always been lingering.

In the international lighting market, the giants frequently sell lighting business related information is still eye-catching. As one of the world's five largest LED companies, Philips Lighting has recently announced an initial public offering and plans to sell 25% of its shares after it failed to "marry" to Chinese buyers last year. As early as last year, Osram, which planned to spin off and sell lighting assets, is still attracting domestic LED listed companies to compete for purchase.

The lighting business, once regarded as the core business, is now frequently being stripped and sold by international bigwigs. When the once proud advantages become no longer obvious, the withdrawal from the field also becomes a matter of course. However, behind the selling of the lighting business, it reflects the extremely fierce competition pattern of the global lighting industry and the strong progress of the international giants in the field of high profits.

Philips intends to divest its lighting business in an IPO.

In recent years, under the background of the rapid rise of Chinese manufacturers and the fierce competition in the international lighting market, lighting giants including Philips, Osram, GE, etc. have been constantly adjusting their lighting business. As the world's largest manufacturer of lighting equipment, Philips's every move is affecting the nerves of countless lighting people.

Philips, which has completed the spin-off of its lighting and medical business, announced in early May that it would make an initial public offering of its lighting equipment division, Philips Lighting (Philips Lighting). The ultimate goal is to enable Philips to become a medical technology provider.

It is reported that Philips lighting equipment business in 2015 revenue of 7.5 billion euros (about $8.7 billion), operating profit of 0.331 billion euros (about $0.382 billion). The company said that Philips Lighting will be listed on the Pan-European Stock Exchange (Euronext) in Amsterdam, the Netherlands, and Philips will sell at least 25% of the equity in Philips Lighting's initial public offering. Goldman Sachs (GOLDmanSachs) and JPMorgan Chase (JPMorgan) will be the global coordinators of the IPO.

Philips CEO Marriott Dun (Frans van Houten) said the decision is "historic" for Philips and will allow Philips lighting products to enter other consumer electronics and medical equipment products. After the initial public offering, Philips plans to gradually sell the remaining Philips Lighting shares.

In fact, as early as 2014, Philips decided to sell the lighting business, but the process took two years. The reason for Philips to make this decision is the small profit of lighting products and the substantial growth of medical equipment products in recent years. In the financial report announced by Philips on the same day, it can be seen that due to the growth of health technology products business, the group's revenue in the first quarter of this year increased by 3% year-on-year to 5.5 billion euros, and the adjusted net profit increased by 14% year-on-year to 37.4 million euros. Better than market expectations. Sales revenue of Philips Health Technology business increased by 5% in the quarter, of which sales revenue of personal health business increased by 6%.

Barclays (Barclays) analysts said in a report that the slow pace of divestiture of the lighting business means that Philips will take longer to improve the performance of the medical equipment business, and the current medical equipment business revenue is 2/3 of the group's revenue. Therefore, Philips has been looking for the best way to sell its lighting business in the past two years, and has tried to sell and IPO independently.

International giants turn to high-profit areas

In fact, from 2011, under the leadership of Marriott, Philips' focus has shifted to the medical and health industry with an annual output value of $125 billion, rather than the lighting business. Marriott believes that the booming demand for technology will allow hospitals to analyze clinical data and allow patients to monitor their health and nutrition through mobile phones. Philips is creating a business that combines medical scanners, electric toothbrushes and other products.

The adjustment of Philips also represents the direction of other international giants. The rise of the mainland industrial chain will bring the industry into a new mature period. Asian manufacturers are driving down production costs, forcing major European and American international companies such as GE, Osram and Cree to focus on high-margin business groups.

In 2014-2015, the traditional lighting factories in Europe and the United States have made strategic adjustments and began to develop into high-profit and high-tech fields. For example, OSRAM, a large German factory, split the traditional ballasts, lamps and LED bulbs and lighting solutions to focus on the development of special lighting applications, such as automatic lighting, LED chips, LED components, industrial lighting, automobile lighting, etc. GE, by splitting solar energy and commercial LED lighting, enables it to focus more on technologies with higher profits and less competition from mainland manufacturers, such as aerospace, health and oil and gas business groups, want to take the lead in the Internet of Things and smart lighting industry; even Cree in the United States has renamed its highly profitable Power (Power) and Radio Frequency (RF) business group to Wolfspeed and is preparing for an IPO public offering.

In the process of formulating development strategies, international enterprises often emphasize the gathering of business to the core competence of the enterprise and the concentration of resources to the core business, so as to improve the competitive advantage and core competitiveness of the enterprise. For example, Samsung Electronics announced in 2014 that it would stop the LED lighting business other than South Korea in order to achieve a more effective and centralized operation strategy. Philips has concentrated more resources on the medical and health care business with higher technical threshold and stronger profitability from the earliest exit from chip manufacturing and TV business to the current sale of lighting business. Osram's move to spin off the general lighting business, it is also to focus its business on high-margin markets such as automotive lighting, smart lighting and solutions. Therefore, these companies' initiatives to divest the lighting business all hope to gather more resources in the high-end part of the industry chain during the process of business transformation.

Changes in the international lighting environment

The adjustment of international giants is not unrelated to the rise of China's LED industry. China has the world's largest LED lighting production and application market, due to the advantages of low cost and high efficiency, so that a large number of Chinese enterprises can launch new products faster, the price is closer to ordinary consumers, and exported to all regions of the world.

With the intensification of competition in the global LED lighting industry, in order to cope with the competition of Chinese LED companies, international giants have to reduce prices to seize market share. According to media reports, in 2016 Philips asked suppliers to reduce the ex-factory price of LEDs to $0.8. In addition, large companies are also affected by bloated organizations and inefficiencies, higher production costs, and the gradual loss of market advantage. Therefore, with the rise of China's LED lighting companies, these companies have stripped the lighting business to meet market challenges.

Jin Xin, former vice president of Osram North Asia, once said in an interview that the advent of the LED era has greatly improved the homogenization of many lighting products, especially the civilian light source based on LED. The homogenization has indeed broken the original barriers of some traditional superior enterprises, making the market more competitive and making the market more like the semiconductor market that we used to know in the past 30 years.

With the international key enterprises to divest the traditional lighting business, have sought to subdivide the field force. In order to move towards the high end of the value chain, enterprises will further strengthen the innovative research and development of automotive lighting, plant lighting, intelligent lighting and other subdivision fields, and provide alternative lighting solutions for different application environments, so that the application of lighting products presents a diversified and intelligent development trend.

On the other hand, with the international lighting giants Philips, Osram, GE and Toshiba gradually splitting or selling their lighting businesses, Chinese enterprises have begun to participate in the merger and acquisition of international lighting enterprises. For example, Guangsheng Group has acquired 13.47 percent of Foshan Lighting held by Osram and Feilo Acoustics has acquired 80% of Xiwannian Group, which gives Chinese lighting brands the opportunity to enter the international market.

Today's semiconductor industry pattern, especially the manufacturing pattern, the industrial supply chain has been highly concentrated in Japan, South Korea, China and other regions. With the advent of the LED era, this pattern will inevitably be derived to the lighting industry, but also the global lighting supply chain eastward. Such changes will certainly bring about a new pattern of benefit distribution, and there will be constant struggle and struggle until a new balance appears. This process is both a danger and an opportunity for LED enterprises.