It's no more high-performance LED manufacturer versus mid-range LED manufacturers in LED lighting business. It is becoming highly competitive and cost-based and is nearly commoditised. The latest indicator of this trend is, Philips has sold its 80% ownership in its LED company Lumileds to GO Scale Capital. GO Scale Capital to pay Royal Philips US$3.3 billion for an 80.1% stake in its automotive lighting and LED components business, and the remaining 19.9% stays under Royal Philips.
“Philips Lumileds is the leader in flip-chip technology that makes high-power LED products possible,” said Roger Chu, research director for LEDinside, a division of TrendForce. “However, LED lighting market in general has shifted toward products of lower prices, so most LED luminaire companies prefer to use the standard and mid-power LED components because of their cost advantage.”
The TrendForce release states "With standard/mid-power LED being priced competitively, the growth of high-power LED have slowed. As a result, Lumileds has been under the pressure of losing market shares. Furthermore, Lumileds faces immense challenges. The rise of Asian LED manufacturers led by Chinese companies and the expiration of the YAG white-light LED patent in 2017, for examples, are serious cost problems that Lumileds needs to address. When the lighting business was under Royal Philips, there had been efforts to outsource the manufacturing to Asia. However, the LED market ultimately has been too competitive for Philips Lumileds to make a turnaround, and its parent company made the decision to sell based on Lumileds’ sliding revenue. "
Chu provides two important points in his assessment of the impact that the Lumileds’ acquisition by GO Scale Capital has on the LED industry:
1. Chinese LED manufacturers have a chance to resolve patent issues and enter overseas markets
Lumileds is one of the five major IP holders in the LED industry. The acquisition also provides the company an additional 600 patents from Royal Philips. In the future, Lumileds will be able to license its vast patent holding in order to boost its operating results. Chinese LED manufacturers will also be able to break through the patent barriers surrounding the foreign markets. With Chinese investors having the controlling stake in Lumileds, China-based companies will have a greater voice when it comes to resolving patent issues and establishing their presence in the global LED market.
2. GO Scale Capital consolidates its resources and provides Lumileds more strategic partners
GO Scale Capital has made a series of investments in companies positioned on the LED supply chain: Lattice Power (epi wafer), TimesLED (epi wafer), ShineOn (package), SunSun Lighting (LED luminaires), and Alighting (LED luminaires and heat dissipation). Once Go Scale Capital has the controlling stake in Lumileds, it may consolidate all its industry-related interests, inserting its new acquisition into the supply chain.
LEDinside expects Lumileds manufacturing outsourcing to other LED makers to continue as Lumileds gains strategic partners in China after the takeover.