Lighting

The LED Lighting Exodus: Samsung joins Philips and Siemens

Samsung Electronics announced, in late October, that it will exit the LED lighting business outside of South Korea, u-turning on what was identified as a key growth business unit just 4 years ago. The decision is the latest example of a large industrial conglomerate dimming its presence in the modern lighting industry. Analysts suggest new LED-only entrants are making life difficult for companies like Philips, GE and Siemens, who had long histories in conventional, incandescent lighting technologies. Earlier in the year we analysed the Global market for LED Lighting in depth, in our report - LED Lighting in Buildings 2014 to 2018 Samsung’s announcement came just under a month after, Dutch electronics group, Philips said it is seeking “alternative ownership” for its lighting business, and a little over a year after Siemens spun off its Osram lighting company. GE, meanwhile, has denied rumours that it is selling its lighting group. Instead, it has shaken up […]

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Samsung Electronics announced, in late October, that it will exit the LED lighting business outside of South Korea, u-turning on what was identified as a key growth business unit just 4 years ago.

The decision is the latest example of a large industrial conglomerate dimming its presence in the modern lighting industry. Analysts suggest new LED-only entrants are making life difficult for companies like Philips, GE and Siemens, who had long histories in conventional, incandescent lighting technologies.

Earlier in the year we analysed the Global market for LED Lighting in depth, in our report - LED Lighting in Buildings 2014 to 2018

Mass_Exodus
Samsung’s announcement came just under a month after, Dutch electronics group, Philips said it is seeking “alternative ownership” for its lighting business, and a little over a year after Siemens spun off its Osram lighting company.

GE, meanwhile, has denied rumours that it is selling its lighting group. Instead, it has shaken up its executive suite in a move aimed at stirring lighting innovation.

Philips said in September that it will spin off its lighting business to expand its higher-margin healthcare and consumer divisions. While Germany's Osram Licht AG, which also makes LED lights, announced a cost-cutting plan that included nearly 8,000 job cuts.

Samsung’s exit came as a surprise to many in the industry, since the company only recently entered LED lighting, and seemed well positioned to succeed.

Already a powerhouse in LED chips – the semiconductors on which LED bulbs are built – it has made forays into the LED bulb and luminaire business and has looked ready for a full-on assault, such as when it introduced new 'smart' LED bulbs at Frankfurt's Light + Buidling trade fair in March.

The product line had many competitors worried, given Samsung's track record of sucking market share away from established players in other industries, such as TVs, mobile phones and appliances. Its surge in phones, for instance, helped topple former industry leader Nokia.

Samsung is not immune to bowing out of businesses however. The company is in the process of dismantling its plasma TV operations, and recently announced it is exiting laptops in Europe.

For Samsung, a lighting retreat might be part of a broader plan to focus its efforts on patching up trouble areas at the company. Samsung announced its worst operating profits in three years when it reported for the third quarter that ended on September 30th. Among its worries: Its famed mobile phone business is now under assault from Chinese companies like Lenovo and Xiaomi.

Analysts say Samsung Electronics' retreat reflects the growing competition from Chinese manufacturers even as demand for LED lighting remains strong. LED lamps last 10 times longer than fluorescent bulbs and 100 times longer than traditional incandescent tungsten filament bulbs.

Despite the LED boom that has upended the global incandescent lighting industry, price wars with Chinese manufacturers have slashed profitability to levels deemed too unattractive in the long run; a key issue we addressed in our research - http://memoori.com/portfolio/led-lighting-in-buildings-2014-to-2018/

"It appears that Samsung decided to fold the business because price competition was so fierce and there was not a lot of room for growth going forward," suggested Seoul-based IM Investment analyst Lee Min-hee.

A spokeswoman at Samsung Electronics said revenue contribution from the business was small but did not comment on specifics, including how much Samsung had invested.

"We will remain active in the LED industry through our LED component business," Samsung Electronics said in an emailed statement, adding that it will focus on areas such as backlighting for displays of consumer products like televisions.

While falling to Chinese competition is not an unfamiliar manufacturing story, the sequence of big players leaving the LED lighting game has shaken the industry.

While GE strives for the innovation necessary to create market share against low cost LED manufacturers, its South Korean, Dutch and German peers will step out of the light, for now.

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