AMSTERDAM – Royal Philips NV said Monday 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 2015 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 currently heads the parts division, will remain as CEO of the new company.
LED sales are surging, as they can be programmed to emit light of different colours and need less energy than traditional lights. Manufacturers such as Philips, General Electric and Cree of the United States, as well as Germany’s Osram, which was spun off from Siemens last year, all saw their LED sales rise at well above double digit rates in 2013, 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 ($1.91 billion) in 2013.
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, said Philips Chief Executive Frans van Houten.
Van Houten said the spin-off was not due to concerns LEDs themselves are becoming a commodity, despite recent price declines.
“I can assure you it is a very sound business with great margins and good profitability,” he said. “At this stage, given the strong intellectual property and differentiation” of Philips’ LEDs, “we think we can compete very well with Asian competitors.”