The long-awaited sale of LEDVANCE, originally the general lighting lamps business of German lighting giant Osram, to the Chinese investment consortium, consisting of the strategic investor IDG Capital, MLS, and Yiwu State-Owned Assets Operation Center (Yiwu), was finally completed on March 3, 2017. At the LFI 2017 held in Philadelphia, LEDinside met with LEDVANCE’s CEO Jes Munk Hansen to talk about the recent deal and its strategic position in the lighting market.
Economies of scale boost sales of LED lighting products and help LEDVANCE venture into emerging markets
According to statistics from LEDinside, the current penetration rate of LEDVANCE’s lighting products stands at merely 30%, meaning there is still plenty of room for improvement compared to other U.S. lighting companies’ performances. However, Jes Munk Hansen emphasized that MLS, with production capacity reaching 70KKK, will supply LEDs and LED lighting products to LEDVANCE. Since LEDs account for around 30% of the overall costs of LED lighting products, LEDVANCE can thus reduce production costs significantly and offer products at more favorable prices.
In a breakdown of revenues by region, North America, Canada and Europe combined make up about 85% of the sale, while the rest of the world represents only less than 20%. However, the partnership between MLS and LEDVANCE is expected to improve LEDVANCE’s cost position for it to venture into emerging markets.
Shipments of LED filament light bulbs expect strong growth in 2017
Thanks to MLS’s acquisition of Sunny World (Shaoxing) Green Lighting, currently the largest manufacturer of LED filament bulbs in China, LEDVANCE will be able to ramp up production of this highly demanded product, and secure a prominent position in this market. Sales of LEDVANCE’s LED filament bulbs in 2017 are expected to surge to around 30 million to 40 million units.
Smart lighting: more attractive prices will drive demands
As big LED companies continue to embrace smart technologies, Jes Munk Hansen said LEDVANCE will also keep up with the industry trend to put a special focus on developing smart light bulbs and lighting fixtures. He added that light bulbs and lighting fixtures currently on offer are all connected, and compatibility is ensured to building an expanding ecosystem. However, he also pointed out some major challenges lying ahead in this market, such as a lack of common communication protocols and high prices, which have hindered the development of smart lighting.
But with increased output and economies of scale, prices will definitely come down to a point where both manufacturers and consumers are comfortable with, and can thus facilitate the development of complete smart lighting solutions, Jes Munk Hansen said.
Future operation focuses on branding, patent protection and R&D
As to its relationship with Osram, LEDVANCE will pay regular patent royalties to OSRAM Licht AG, and can also use the OSRAM and SYLVANIA brands on the product level in the future without limits, which will help LEDVANCE market their products more effectively. Looking ahead, the company will maintain its focus on R&D to improve product quality. With MLS’s cost-efficiencies and manufacturing scale position, LEDVANCE is confident that it will be able to bring to market advanced lighting products at desirable prices.
(Joanne/ LEDinside)
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