Samsung to scale back LED lighting
Samsung Electronics will cease its LED lighting business outside of South Korea, scaling back what was identified as a key growth business four years ago, according to a news report by Reuters.
LED, rechargeable cells for hybrid electric cars, solar cells, medical devices and biopharmaceuticals were five areas singled out by the Samsung Group in 2010 as new growth drivers. At the time, the group forecast the businesses would generate Â£29.5 billion in annual revenues by 2020 for its affiliates including Samsung Electronics.
But, says the Reuters report, Samsung Electronics has struggled to gain traction in the LED lighting market, failing to loosen the grip of established rivals such as Philips and Osram in advanced markets while facing mounting margin pressures from Chinese competitors in emerging markets.
Samsung Electronics will remain active in the LED industry through the LED component business, focusing on areas such as backlighting for displays of consumer products like televisions.
IHS's market analysis
"In recent weeks, news had been circulating that Samsung was planning to announce it would leave the LED lighting business altogether. While the new development stopped short of a complete divestment with Samsung continuing to keep its LED luminaire business, the news is proof that increasing competition from lower-priced Chinese competitors is making the overall LED market less profitable for most manufacturers, " said Stewart Shinkwin, market analyst for lighting & LEDs at IHS Inc in his latest research note.
According to Shinkwin, the LED luminaire (fixture) market has not seen the same price competition that has plagued the LED lamp market. LED luminaire manufacturers have managed to maintain higher margins as products are more differentiated. "For all its heft, however, Samsung has not also been able to benefit from its vertically integrated supply chain, in which the company provides components for its own internal divisions to market to external markets."
A few years ago, the low-priced products from the Chinese were generally of inferior quality in terms of lifetime, efficiency and colour rendering, says Shinkwin. But the LED lamps from China today are comparable in performance while remaining significantly cheaper, forcing many high-end LED lamp manufacturers such as Samsung to drop prices significantly and to accept lower margins. The margins, in turn, have now become unsustainable for a number of suppliers.
"Samsung's pull out is not the first such move by a company in the LED market. In the last 12 months Toshiba shelved its LED lamp market in the United States and now supplies to just Europe and Asia. Toshiba's move stemmed from its inability to obtain the market share it had initially hoped for, in the wake of stiff competition from rival such as Cree, Feit Electric, Osram Sylvania, Philips and TCP."
Samsung will still look to maintain and develop its LED lamp business in its native South Korea, but pulling out of the global LED lamp market could have repercussions on its total LED component business supplying the LED packages and modules for its lamps, Shinkwin concludes.