China LED Lights Patent Issues might be soloved by acquisition of Philips Lumileds

In the year 2014, the LED industry had be wondering about the company that would finally buy Philips lighting unit(Philips Lumileds) and automotive LED lights business.

Previous market rumors pointing towards group of CVC and KKR as successful bidders of the deal proved wrong, even the final buying 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 combination of more than 600 patent families related to LED lights manufacturing and automotive LED lights from Philips to Lumileds.

Whether the new Lumileds will attract IPO investors will be very important for Philips group and investors. For this reason, 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.By licensing Lumileds patents to Chinese manufacturers, it could also solve the lack of patent issues, and enable Chinese companies to develop quickly 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.