(Yicai Global) June 6 -- The lighting business of the Dutch electronics giant Philips has decided to close its Shenzhen plant in response to demand for smart and Internet-based developments in the residential lighting market and to help improve the industry's competitiveness, Philips Lighting BV said in a statement to Yicai.
Philips Lighting Manufacturing (Shenzhen) Co. will cease operations on May 31. A photocopy of the "announcement on the early dissolution" of the company was circulated on the Internet late last month.
Philips Lighting Shenzhen announced to staff that the company has been through a number of difficulties including continued economic slowdown, rising costs, and deteriorating businesses in recent years. Despite various measures, the company has still failed to turn around the situation. Its shareholders and board decided to dissolve the company earlier than scheduled.
However, these may not be the fundamental reasons. Going forward, global lighting giants like Philips and Osram will no longer produce products themselves -- a strategy they drew up a couple of years ago -- Mr. Zhang Hongbiao, director of the financial services project at Gaogong Industry Institute, who has tracked and studied the LED lighting industry for years, told Yicai.
Mr. Zhang said Philips will outsource LED packaging and lighting products and only produce LED chips itself. In other words, Philips will outsource production and only be responsible for branding, quality control, design and channels.
The plant's predecessor was Weimashi Lighting Co., established in 1994 by Belgium's Massive and Hong Kong's Yuwei Group. Philips acquired a 52 percent stake in Weimashi Lighting in 2008, and set up Philips Lighting Shenzhen in October 2009. In late 2010, Philips bought the remaining 48 percent of the company.
Given soaring land and labor costs in Shenzhen it is very normal for Philips to close a non-profitable business, Ms. Zhang Yaping, deputy head of the member services department of the Shenzhen Light Emitting Diode Industry Association, told Yicai.
Philips Lighting also said on June 3 that leaders from the company met with energy ministers attending the seventh Clean Energy Ministerial summit on June 2. At the meeting, the company pledged to sell more than two billion LED light bulbs by 2020. It is estimated that reaching this goal will save an amount of energy equivalent to that generated by 60 medium-sized coal-fired power stations with emissions equivalent to that from 24 million cars by 2020.