What’s interesting after Philips Lighting’s “solo flight”?

According to reports, the entire lighting industry is currently in the process of change. This spin-off may be just a microcosm of the transformation of the LED industry. The LED revolution is forcing many companies to head towards the foreseeable future.

Philips Lighting is "flying solo" from the Philips Group.

As early as September 23 last year, the Royal Dutch Philips Group announced that the group would be split into two companies, health technology and lighting, and share the Philips brand.

Philips CEO Frans van Houten said at a conference call: "The current time is very suitable for Philips to make the next strategic step."

So, what is this time?

It can be seen that Osram, another global lighting brand, has also been independently listed from Siemens before this. In July last year, Philips separated and integrated its LED packaging division Lumileds and automotive lighting division, which were not leading businesses, into a new independent company.

On the surface, it looks more like the industry giants are packaging the lighting business independently, putting pressure on Philips Lighting, which ranks first in the lighting industry. The successive spin-offs of business departments and groups are like the rhythm of Philips Lighting itself stripping off all constraints and going big. This time the global lighting giant’s “solo flight” is intriguing.

The logic of solo lighting business

What is certain is that the spin-off of the huge Philips will take a long time. A few days ago, Philips Lighting CEO Hong Anli responded briefly in an interview that the spin-off plan will last 12 to 18 months globally.

The entire lighting industry is currently in the process of change. This spin-off may be just a microcosm of the transformation of the LED industry. The LED revolution is forcing many companies to head towards the foreseeable future. The next battlefield and future is most likely the era of intelligent interconnection. In the context of the spin-off, Philips Lighting is banking on the growth of the LED market to drive the company's profit growth.

Philips's 2014 annual report and fourth quarter financial report show that Philips' fourth quarter sales were 6.5 billion euros (equivalent to approximately 44.964 billion yuan), with a surplus of 743 million euros (equivalent to approximately 5.238 billion yuan). Lighting (excluding Lum The combined business of ileds and automotive lighting) made a profit of 178 million euros (equivalent to RMB 1.231 billion), a decrease of 3% compared with the same period last year. LED-based sales increased by 20%, but the overall decline was offset by a 14% decrease in traditional lighting sales. LED current sales account for 37% of total lighting sales, compared with 31% in the fourth quarter of 2013;

This shows that the LED business is moving towards Philips's 2015 sales expectation of 50%.

Philips said that its annual operating income was only 21.4 billion euros (equivalent to approximately 148.035 billion yuan), a decrease of 3%; profit was 1.2 billion euros (equivalent to approximately 8.301 billion yuan), a decrease of 65%. Among them, the performance of the healthcare sector declined, while the sales of the lighting sector increased. In 2014, lighting sales were 6.9 billion euros (equivalent to approximately 48.8 billion yuan).

A report by research institute LEDinside points out that while large enterprises enjoy economies of scale, they also have to bear the diseconomies of scale caused by being too large. The Philips Group has 113,000 employees worldwide. In recent years, its organizational structure has been widely criticized for being too bloated. The benefits of economies of scale are offset by the bureaucratic effects of excessive hierarchies.