And Philips Lighting has all along maintained its leading global position steady as a rock. Around the world 65 percent of airports, 30 percent of hospitals and offices, and 55 percent of soccer stadiums are illuminated by Philips light bulbs at the press of a switch.
However, Philips has set its eyes on the future LED lighting market, which is expected to be worth billions of dollars.
Eying the Rapidly Growing LED Market
On the road to his office at the Philips headquarters in Amsterdam, Gottfried Dutine, the company's executive vice president, predicts that the LED lighting market will grow 30 percent annually for the next ten years. Next year the market will have grown to 1.5 billion euros from 700 million euros two years ago.
In contrast to other industries which face an uncertain future in these times of complex industrial and economic changes, the prospects for LEDs are clearly more predictable.
Three years ago Philips correctly perceived the major trend toward the replacement of incandescent bulbs, and decided to completely shift to energy-saving lighting solutions. Today 53 percent of the Lighting Division's revenue comes from energy-saving "green" light bulbs.
When building its LED business, Philips made its entrance downstream, skipping distributors and instead directly making contacts with commercial clients and end consumers.
In explaining the Philips strategy, Albert Zomer, head of marketing at Business Unit Luminaires Europe, points out that the company developed its LED lighting business in two major directions. The first was entering the light fixtures market to directly grab the consumer market. The second was zeroing in on energy-saving light bulbs, continuing to improve the energy-saving capabilities of existing light bulbs, and vigorously developing LED light bulbs.
Key Strategy: Buying Up the Entire Value Chain
Within the past four years Philips has acquired more than 11 companies. Today the group does not lack a single link in the lighting value chain, from upstream microchips to midstream illuminants and downstream light fixtures, from lighting design to manufacturing, technology, applications and patents. Philips has brought the leading names in the industry into its fold as part of its global expansion. These include Partners in Lighting (PLI), Europe's largest maker of light fixtures; Genlyte, the largest maker or light fixtures in North America; Color Kinetics, a major U.S. LED lighting manufacturer; and Lumileds Lighting, a leading U.S. manufacturer of high-efficacy white LEDs.
Edward Po, general manager of Philips Taiwan Ltd. – Lighting Division, reveals that Philips sold off all non-core business over the past few years, while buying up LED manufacturers, because headquarters believes that sooner or later all incandescent bulbs will have been replaced so that light fixtures and lighting applications will become the market mainstream. Consequently, the company devoted a huge amount of capital to buying up light fixture makers as a platform for getting into different applications in the future.
Last year Philips bought Genlyte for US$270 million, the largest acquisition in the company's history, because of the importance it places on office, outdoor and other professional lighting in consumer applications.
"When there is a big change, you'd better be quick and decisive," says Allard Bijlsma, who used to work in the consumer electronics division, but last year became CEO of Philips Consumer Luminaires.
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