Go Scale Capital Acquisition of Philips Lumileds Might Solve China LED Patent Issues

Over the past year, the LED industry had pondered about the company that would eventually take over Philips lighting component (Philips Lumileds) and automotive business.

Previous market rumors pointing towards CVC and KKR consortium as successful bidders of the deal proved wrong, even the final acquisition deal price was above previous estimates of $2.7 billion.

Philips announced today that Chinese-financed Go Scale Capital had acquired 80.1% of Lumileds shares, and Philips would be retaining less than 19.9% of the shares. The transaction value is estimated to be approximately US$ 3.3 billion, and expected to be completed in the third quarter of 2015.

Following the transaction, the new company will continue to trade under the name Lumileds, led by CEO Pierre-Yves Lesaicherre. Philips will remain an important customer of Lumileds and will continue the existing innovation and supply partnership. The transaction includes the transfer of a broad patent portfolio of more than 600 patent families related to LED manufacturing and automotive lighting from Philips to Lumileds.

LEDinside analyst insights:

Whether the new Lumileds will attract IPO investors will be very important for Philips group and investors. Hence, market observers will be focusing on Lumileds profitability and revenue in the near future.

Lumileds has a large number of LED patents, and was traditionally one of the top five LED patent holders in the industry. It is possible that the company will proceed by licensing its patents to other manufacturers to improve business operations. As the Chinese government aims to increase domestic patents and improve intellectual property rights, top Chinese LED manufacturers might be able to purchase Lumileds patent licenses, observed LEDinside analysts.By licensing Lumileds patents to Chinese manufacturers, it could also solve the lack of patent issues, and enable Chinese companies to expand in international markets.

There might even be an opportunity for Chinese LED manufacturers to enter Philips lighting or Lumileds supply chain. Lumileds has been focused in high-power LEDs manufacturing in the past. Following the rise of Asian manufacturers low to mid-power LEDs, European and U.S. manufacturers have been outsourcing low and mid-power LED manufacturing to improve market competitiveness. It is possible that Lumileds will work with a strategic Chinese partner in the near future to develop its low to mid-power LEDs.

About GSR Ventures

GO Scale Capital is a new investment fund sponsored by GSR Ventures and Oak Investment Partners. The consortium partners are Asia Pacific Resource Development, Nanchang Industrial Group and GSR Capital. The GO Scale Capital team has deep technology expertise and a track record in scaling up disruptive technologies in China. 

GSR Venture, which is a sponsor of GO Scale Capital was founded in 2004, and currently manages funds worth US $1 billion. The company is focused on investing in semiconductor industry, Internet, wireless communication, media and green energy sectors.

The company has completed 26 investments in China. Some of the investments include Chinese LED companies, such as Lattice Power, Lattice Lighting, Shineon and TimesLED.

GSR Venture Chairman and co-founder Sonny Wu has been specifically focused on semiconductor, new material, and green energy investments. He is also the Chairman for LED companies Lattice Power, Shineon and semiconductor company Panovel.

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