Lumileds Remains Largely Unaffected After Go Scale Capital Acquisition

LEDinside recently interviewed Kevin Lucido, Director of Global Marketing Communications at Lumileds, Philips, about the company’s business and technology developments after Go Scale Capital acquires the company.

Dutch lighting giant Royal Philips announced on March 31, 2015, its LED component and automotive lighting business, Philips Lumileds, was sold for US $3.3 billion to Chinese investment fund Go Scale Capital. Under the deal Go Scale Capital will have an 80.1% stake in Philips Lumileds, while Philips will have ownership over the remaining 19.9%. The transaction is scheduled to be completed by third quarter of 2015. Following the transaction the former Philips company will be trading under the name “Lumileds”.

Lumileds automotive lighting business to remain unaffected after Go Scale Capital transaction. (Photo Credit: Phlips)

Talks between Philips and Go Scale Capital started since late 2014, said Lucido. “We have decided to partner with GO Scale Capital, because of the shared vision to build and grow Lumileds, their competencies and expertise in the LED components and automotive technology industry and the financials of the transaction," he said. Prior to Philips announcement, market rumors pointed out private equity firms CVC and KKR were in the lead of the bidding process. Lucido has declined to comment on CVC and KKR involvement in the bidding process.

Asked about future IPO plans to fund the new stand-alone Lumileds company, Lucido did not say when this would happen. Instead he pointed out the company had just signed the transaction, and is working hard to complete the transaction in the coming months.

Lumileds will continue to operate under the leadership of Pierre-Yves Lesaicherre, while Sonny Wu, co-founder and managing director of GSR Ventures and chairman of GO Scale Capital, will serve as interim chairman of Lumileds following the completion of the transaction, said Lucido. The creation of the stand-alone Lumileds company and sale of the majority of interest to the consortium led by Go Scale Capital will also have no impact on the company work force, he added.

Partnership and supply relationship between Philips’ Lighting Solutions business and Lumileds will also be the same as before. “A supply agreement will be put in place between the new company and the Philips Lighting Solutions business,” said Lucido. “Philips’ Lighting Solutions will continue to source from this new company as well as from other suppliers, as before.”

Lumileds is conservative about transferring LED patents to Chinese LED companies

As for the possibility transferring patents to Chinese LED companies, such as GSR Venture capital funded Lattice Power, the chances might be slim. GSR Venture is one of the Chinese investment firms funding Go Scale Capital. “Lumileds operates in an industry that is characterized by constant innovation and having a strong IP portfolio is an important prerequisite to be successful,” said Lucido. “Lumileds and its owners will therefore be protective of the strong and broad IP portfolio that Lumileds owns.”

However, there is the possibility of Chinese standard or mid power LED manufacturers, especially those funded by Go Scale Capital, to team up with Lumileds. “It is too early to go into the details, but I can say that the GO Scale Capital team brings deep knowledge of the LED components and automotive technology industries. Through their past investments in the LED industry, they have access to complementary technologies and manufacturing capacity. This uniquely complements Lumileds’ high-power LED manufacturing footprint and expertise, and the combination offers opportunities for the company to pursue further growth and scale,” said Lucido.

Lumileds technology focus and automotive lighting business to remain unaffected

Lucido denied market speculation that Lumileds future LED technology focus might be impacted by Lattice Power’s focus on GaN-on-Si, and swap its LED technology focus after the merge with Go Scale Capital. “Lumileds leading position, its expertise and manufacturing base is based on its existing technology,” he said. “It is therefore currently not foreseen that Lumileds will switch technologies.”

The company’s automotive lighting business operation will remain unaffected. “The automotive lighting activities from Lumileds will continue as before, with continued full attention on the strict quality requirements of automotive Tier-1 customers,” said Lucido. “We anticipate that the tight integration of Automotive and the LED components business within Lumileds makes the automotive lighting business even stronger and will enable them to optimally serve their customers in the conversion to LED technology.”

Overall, it appears most of Lumileds businesses including its management structure, automotive lighting business, and partnership with Philips Lighting Solutions will remain largely unaffected by the sell to Go Scale Capital. There will be some partnership possibilities with Chinese LED manufacturers in standard and mid-power LEDs to complement its product portfolio. However, when it comes to more sensitive patent licensing to Chinese LED manufacturers that will completely overturn the LED industry, the outlook remains pretty uncertain.

(Author: Judy Lin, Chief Editor, LEDinside)

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