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Philips sold Lumileds for this too clear!
Aug 07, 2017

          Philips planned to spin off its wholly owned subsidiary, Lumileds and automotive lighting, to become an independent company by the first half of 2015.

          But on March 31, 2015, philips announced a $3.3 billion sale of its 80.1 percent stake in Lumileds to GSR GO Scale Capital, a fairly decent trading price in the LED industry.

          After the sale of its bulk stake, philips will be able to focus more on its brand and medical products business and estimate that the market will output about $130 billion.

          LED components and manufacturing businesses that are not - so - profitable (not so lucrative) can take less effort.

          According to philips' financial report in 2014, the company's medical products business contributed 42.9% of revenue, compared to 2013 increased by 1.9 pp, and the interest of the business, tax and amortization accounted for as high as 56.7% of the total. on the other hand, including components and LED lighting products, lighting business accounts for only 32.1% of overall income, compared with a year ago, down 4 pp, its interest tax, depreciation and amortisation (EBITA) share is only 31%, far below the medical business.

          Lumileds is a major focus on manufacturing high power LED components, however, philips has been increasing purchase from Taiwan and mainland China suppliers of low - medium power LED components, because the market demand for these components are rising sharply.

The production capacity of these components from Asia is also increasing, making their prices more competitive.

           Based on the existing capacity of MOCVD in Taiwan and mainland China, Digitimes Research projects that in 2015, China's LED components accounted for 34.7% of the global total, and Taiwan accounted for 25.5%.

          At the same time, Lumileds is expected to account for less than 3 percent, meaning that Asian suppliers will be leading the LED industry in 2015.

Philips has little competitive advantage with Asian manufacturing suppliers, and the lighting business, which includes Lumileds, is more "weak" than its health-care business.

         The sale of the Lumileds stake is a huge relief for philips, which has been burdened with high costs and strong work pressure.

          At the same time, the deal should also greatly improved the Lumileds business structure and operations, the company has more choices from capital markets to raise funds, to seek partners and develop new business, and a lot more flexibility in the new strategic plan.