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Chinese LED players battle to seize Osram’s lighting business

Chinese LED players battle to seize Osram?s lighting business

By BizLED Bureau

Jan 14, 2016: In a major move by Osram?s, five Chinese LED manufacturers will be toiling head-to-head to gain Osram?s lighting business, as the German company announced it would be warding-off its general lighting business in April 2015 due to lesser profits.

MLS (also known as Forest Lighting), ETI, Tsinghua Tongfang, Felio Acoustics and Foshan Lighting are the five listed Chinese companies in the race for Osram?s lighting business.

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With the needed financing platforms, all the potential Chinese buyers are ready but for the German lighting company price is just one of the decisive factors. Another concern is the synergetic effect which will result from this partnership.

Chinese LED players battle to seize Osram?s lighting business

Osram currently sells its general lighting and related businesses under Classic Lamps & Ballasts (CLB) and LED Lighting Solutions (LLS). The Chinese players value Osram?s , lighting distribution channels, overseas brand advantages and any of the names that successfully absorbs Osram, would be able to upgrade its international lighting business.

Chinese LED manufacturers possess cost advantages and flexibility, which makes them an ideal manufacturer for Osram?s general lighting business.

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If we observe an LED OEM partnership angle, Foshan Lighting and Shanghai Felio Acoustics do not have any upstream LED chip production capacity, and could use Osram?s LED lighting components in new lighting products. ETI and Tsinghua Tongfang excel in LED chip production capacity, which lock horns with Osram?s LED chip expansion strategy. Hence, a compromise in future partnerships will be required from both partie. However, if Osram gets into a partnership with MLS, the company may lessen its LED component prices through MLS large LED package production capacity. Osram?s luminaires could then reintroduce lower priced LED components.

The questions remains as who will acquire Osram?s lighting business as it is still too early to judge. However, Felio Acoustics recently stated that it will be procuring Havells Sylvania lighting distribution channel for an estimated worth of EUR 148.80 million (US $163.15 million). Felio Electric will be financing 40% of the acquisition with company assets and cash, which in turn signals the company?s early exit from the race to acquire Osram?s lighting business. MLS General Manager Lawrence Lin spoke to media couple of times about the Chinese company?s interest in acquiring Osram?s lighting business, but also expressed that the company faces tough competition. Especially from Tsinghua Tongfang , Foshan Lighting and ETI that have shown their mettle in the capital market. Manufacturers are using multiple financing methods, and with the estimated depreciation of the Chinese Yuan in the next two years, it will be increasingly difficult for Chinese companies to finance the acquisition of U.S. dollar assets with Chinese Yuan loans.

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