Royal Philips NV said yesterday it plans to spin off its fast-growing LED parts business into a separate company, to win new customers and to capitalize as manufacturers integrate LED lights into an ever-widening array of products.
Philips, the world’s largest lighting producer, says the separation will be complete by early next year, but it is not clear yet whether the division will seek a separate listing, or if it will remain within Philips for a time before it is sold. Philips executive Pierre-Yves Lesaicherre, who heads the parts division, will remain as CEO.
LED sales are surging, as they can emit light of different colors and need less energy than traditional lights. Manufacturers such as Philips, General Electric Co and Cree Inc of the US, as well as Germany’s Osram GmbH, which was spun off from Siemens AG last year, all saw their LED sales rise at well above double digit rates last year, even as the price per bulb fell.
Philips’ LED parts business, which is a major supplier to carmakers, had sales of 1.4 billion euros (US$1.91 billion) last year.
Philips is prepared to become a minority shareholder in the parts business and will remain a big customer as it continues to sell its own branded lights and services, chief executive Frans van Houten said. The spin-off was not due to concerns LEDs themselves are becoming a commodity, despite recent price declines, he added.
“I can assure you it is a very sound business with great margins and good profitability... At this stage, given the strong intellectual property and differentiation” of Philips’ LEDs, we think we can compete very well with Asian competitors,” he said.