Philips’ Dramatic Move Into LED Lighting

Royal Philips Electronics – the Dutch manufacturer known for its Magnavox televisions and Norelco shavers – is shifting its home electronics business to high-tech commercial lighting.

The move into a new industry is not unusual: Philips has been in a state of constant transformation and been buying and selling divisions for some time, writes The New York Times.

The company itself is getting smaller, with annual gross sales falling 30 percent over the past seven years to 26.8 billion euros, or about $37.5 billion. Management hopes to push it back up to the levels it was at in 2000 by capitalizing on both the green trend and the aging trend.

In the last two years, Philips has bought 16 companies, 11 of them U.S, most of which specialize in either lighting or hospital scanning and monitoring equipment.

Through the purchase of LED manufacturer Color Kinetics lighting fixtures maker Genlyte, it has secured a leading position in the market for the next generation of light bulbs.

LED bulbs (those made with light-emitting diodes) typically use one-tenth the power of traditional light bulbs and last up to 20 times as long, making them an ideal lighting source for large scale projects like commercial buildings.

An LED that replaces a $1 incandescent light bulb or a $2 compact fluorescent bulb costs about $60, so residential use is still limited, especially during an economic downturn when consumers reduce spending.

But those in emerging markets who are gaining more income may be a prime target for the product, because one of the very first things people buy in such markets is light, said Philips’ CFO, Pierre-Jean Sivignon.

In two years, at least 20 percent of Philips’ lighting sales for commercial use will come from LEDs, he said.

To that end, Philips will continue to spend heavily on LED research and development, putting about 5.2 percent of its current global lighting revenue toward the technology.