Lighting Applications – The Final Battleground
The venerable century-old institution that got its start in incandescent light bulbs is plunging into the new era of LED lighting. Using a clever joint venture model, OSRAM is deploying around the globe.
Lighting Applications – The Final BattlegroundBy Fuyuan Hsiao
From CommonWealth Magazine (vol. 423 )
In Beijing in 2008, OSRAM was a major presence.
Beijing's Capital International Airport Terminal 3, which went into use last February and has been touted as one of the largest buildings in the world, is illuminated day and night by 152,600 OSRAM light bulbs.
During the 2008 Olympics, the Beijing National Stadium, more commonly known as the Bird's Nest, shimmered with brilliance under 11,000 OSRAM bulbs, and the illuminated wall cascade outside the Bird's Nest was animated by 46,000 OSRAM light bulbs, creating a magical, misty atmosphere.
In an unremarkable white building on a street corner on the outskirts of Munich, OSRAM president and CEO Martin Goetzeler, wearing spectacles and a serious expression, discusses business with subordinates in a simply furnished office appointed in black and white.
Just a few days ago Goetzeler held a worldwide corporate executive conference at the company headquarters, where he announced OSRAM's headlong push into the era of LED lighting.
The Rapid Rise of the LED
When he took over the company's top executive position four years ago, Goetzeler reckoned that it would take quite some time for LED lighting to penetrate the lighting industry. But he now acknowledges, "It appears faster than our assumption. We have to adjust very fast to cope with the change."
For the century-old company, LED is the most powerful force pushing it towards its next century. OSRAM, whose name is a compound of "osmium" (a chemical element) and "Wolfram," got its start with tungsten filament light bulbs. For a century the company stuck to the conventional lighting business, never venturing into other fields.
Compared to chief industry rivals like Phillips and GE, OSRAM seems focused and homogenous. Goetzeler admits just as much, asserting that OSRAM is a lighting brand. And he says it has no plans to change course, because lighting is what it does best.
As incandescent light bulbs are being forced out of the market, OSRAM is putting all its eggs in the basket of energy-efficient light bulbs and LEDs. Soon after Goetzeler's arrival, OSRAM made the aggressive decision to drop incandescent bulbs entirely and go full speed ahead in the development of energy-saving products.
To date, incandescent lighting has shrunken to just five percent of the company's business, while so-called "green" light bulbs have rocketed to 60 percent. As for the closely-watched LED segment, sales of related products accounted for just three percent of the pie two years ago. But this is expected to change, as Goetzeler has set a target of 22 percent of company sales volume from LEDs by 2013.
Joint Venture Strategy for Vertical Integration
OSRAM entered the LED lighting field in a different way from most other major industry players.
Similarly, OSRAM is opting for a unique strategy of vertical integration, with solid positioning everywhere from upstream chips to downstream lighting fixtures and applications. However, it has approached LED integration largely via joint ventures or controlling investments, in lieu of acquisitions.
For instance, it partnered with major German semiconductor company Infineon in 1999 to establish OSRAM Opto Semiconductors, a firm specializing in LEDs and related components. In November of last year OSRAM purchased Siteco Prosperity Lighting of Hong Kong, becoming the largest shareholder in Foshan Lighting and Electrical. Next, it formed a joint venture with another Hong Kong company, Traxon Technologies, in a bid to capture professional lighting systems and solutions for the architecture industry.
Christian Schraft, senior vice president and CEO of the consumer lighting business unit, observes that although OSRAM is the world's second biggest lighting manufacturer, it is not as heavily capitalized as other competitors, and the company's joint venture model allows it to spread risks. By taking controlling interest in other companies, it can set the course of operations to strengthen OSRAM's positioning. Furthermore, it is able to build on other companies' strengths, extending OSRAM's operations around the globe.
Consequently, despite being a German company, 90 percent of OSRAM's sales are derived from business outside Germany.
In the case of the joint venture with Foshan Lighting, OSRAM has been able to make Guangdong a production and R&D base from which to launch into the China market. OSRAM transformed the Foshan base into a dedicated energy-saving bulb facility. LEDs manufactured there are not only marketed worldwide, but have even captured China's LED streetlight market.
OSRAM has also taken advantage of the manufacturing prowess of the German automobile industry (BMW's headquarters is only about a 20-minute drive from OSRAM's), diving into the auto lighting sector as a springboard for going after the LED segment. Today OSRAM is the world's top auto lighting supplier, generating 730 million euros in annual revenue.
Lighting Applications – The Final Battleground
In the basement exhibition center at the company headquarters, Schraft patiently goes over OSRAM's century of evolution, from tungsten filament bulbs to LED lighting, speaking English with only a scant trace of a German accent. Trained as a physician before switching to the lighting business, Schraft appreciates that right now is the most interesting time in the history of lighting.
He observes that the LED industry will develop in two directions, chips (parts and components) and lighting fixtures. Chips will eventually become standardized, while lighting fixtures will be entirely determined by applications, which is the final battleground where corporations will fight it out.
In the effort to command the vast applications market, OSRAM has not only entered into joint-venture partnerships to form a lighting fixture company and purchased an LED illumination company, but has also set up lighting consulting and design companies to ensure the provision of total solutions to its customers.
The lighting market's transition from conventional illumination to LED, Schraft offers, began with the retrofit market, re-equipping pre-existing conventional lighting installations with LED fixtures, and will undoubtedly lead to a lighting revolution in which the light source becomes an integral part of fixture designs.
"How does light accommodate people's emotions and needs? How does light please people? These are the biggest issues for LED lighting," asserts Schraft.
Paraphrasing the Book of Genesis in which God declared, "Let there be light," Schraft, seated on a red sofa bathed in cool and warm LED lighting, jokes that in the future it will be more like, "LED there be light!"
This is the lighting industry's dream for shaping the world.
Translted from the Chinese by David Toman
OSRAM Company Profile
1906 – OSRAM brand established.
1919 – AEG, Simens & Halske AG, and Deutsche Gasgluhlicht AG merge light bulb manufacturing operations.
1978 – Simens becomes the sole shareholder.
Headquarters: Munich, Germany (Bavaria)
CEO: Martin Goetzeler
2008 revenue: 4.6 billion euros
2008 profits: 400 million euros
Employees: 43,500 worldwide
Businesses: light bulbs (#2 in the world), lighting patents, automobile lighting (#1 in the world), opto semiconductors, cinema lighting (#1 in the world)
Chinese Version: 燈具才是最後決戰場