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Philips to create separate company for Lumileds and Automotive divisions

Philips has announced that it has started the process to combine its Lumileds components and Automotive lighting businesses into a separate company.

The Dutch giant will seek third-party investment for the new company but said it intends to remain a shareholder and customer of the business. It will also continue to collaborate with the new company on research and development.

Philips Lumileds, Malaysia

“Guided by our long-term strategy, we continue to actively manage our portfolio of businesses,” said Frans van Houten, chief executive officer of Royal Philips. “Philips’ strategy in lighting is to intensify its focus on connected LED lighting systems and services, LED luminaires, and LED lamps for the professional and consumer markets. Both our Lumileds and Automotive lighting businesses are strong players in the lighting industry and ready to pursue more growth and scale, independently of Philips Lighting. As a world-leading lighting components business, they will have increased flexibility to attract additional investors to accelerate growth.”

“I am confident that the combined business will be able to extend its leading portfolio of digital lighting components and achieve robust growth, serving even more customers in the industry, including of course Philips Lighting,” said Philips Lighting chief executive officer Eric Rondolat. “By combining Philips Automotive lighting and Lumileds, the Automotive lighting customers will continue to benefit from a fully integrated end-to-end R&D and supply chain, enabling the adoption of LED technology in automotive applications.”

Speaking to Lighting a spokesperson for the company rejected the suggestion that the separation was designed to create a firewall between the components division and the professional solutions division so that OEM customers would feel more confident about doing business with a competitor: “If you look at our lighting activities, one way to look at them is as conventional lighting versus LED lighting. But in this case it’s more important to look at components versus integrated systems and solutions. Those two activities each have their own dynamics and capital needs and we feel that it is better long-term for those component activities and for Philips if that business is a standalone company.”

Philips said sales of the combined businesses were approximately EUR 1.4 billion in 2013. The chief executive officer of the new company will be Pierre-Yves Lesaicherre, the current chief executive officer of Lumileds. The company expects to complete the process to combine Lumileds and Automotive into an integrated business within the Philips Group in the first half of 2015. Costs associated with setting up the combined business are expected to amount to EUR 30 million in the second half of 2014.