Osram Licht AG to Focus on Automotive Lighting, Smart Lighting and LED Components After Parting Its Lighting Business, TrendForce Says

Osram Licht AG yesterday (April 21) has announced that it is proceeding with the next phase of its corporate reorganization, sending a shockwave across the LED industry. The announcement from Germany-based lighting giant follows Dutch electronics company Royal Philips ’ sale of its automotive lighting and LED components business.The underperforming divisions that Osram will let go are Classic Lamps & Ballast (CLB unit) and LED Lamps & Systems (LLS unit). They account for 40% of the company’s total revenue. The divisions that Osram deems valuable and will hold on to are Opto Semiconductor (OS unit), Specialty Lighting (SP unit), and Luminaires & Solution (LS unit).

Roger Chu, research director at LEDinside, a division of TrendForce, said Osram was spun off from Siemens in 2013 following the latter’s decision to focus on core businesses. Since then, Osram is listed as an independent company with a century-old brand name in lighting. Chu further stated Osram is again forced to spin off or sell part of its business as it faces significant challenges in the fiercely competitive market, retaining only the core and profitable units. With this restructure, Osram will concentrate on automotive lighting, project-based smart lighting solutions, and advanced light source technologies (such as LED and laser). These business operations target the business-to-business market, which offers higher profit margins as well as presenting higher technological thresholds for market entrants.

According to LEDinside, the LED lighting industry’s market value reached US$21 billion in 2014 with LED light bulbs accounting for 37%. Especially since the beginning of 2011, LED light bulbs had their prices reduced by 30% annually. "Although falling prices stimulated strong demands, price wars kept eroding industry players’ profit margins," said Chu. The profit and shipment growths of LED bulbs cannot compensate the market decline in traditional lighting products, and this is the main factor behind the recent actions taken by Osram and Philip. 

The decisions made by Royal Philips and Osram Licht AG show that these major players in the lighting industry do not see a rosy future for LED lighting. LEDinside considers two types of candidates available for future takeovers of these companies’ lighting business divisions. The first group will be Chinese lighting companies that have the cost advantage and the ambition to become global enterprises. The other group will be big global tech companies that are not originally in the lighting business. These companies, however, are willing to branch out into this field to pursue dominance in other emerging sectors, such as smart home. The direction that of the LED lighting industry will take in the future depends on the kind of strategic partners that will acquire the Osram’s and Philips’ brands.

Figure: LED Light Bulb Price Trend, 2011-2015