Philips selling off OLED group

Lighting giant Philips is selling off its OLED operations.

The company quietly announced the decision to employees on 20 January, a Philips spokesperson told Lux.

'In line with our strategic direction, we announced our intention to divest our OLED activity to focus our business and resources on LED based connected systems and services,' the spokesperson said. 'With this measure we will be able to focus our resources and be better positioned to capitalize on the fundamental changes taking place in the lighting industry, where value is shifting from individual products to systems and services.'

The website +Plastic Electronics, which first reported the news, said that, 'The Netherlands-based firm is already in discussions with several potential buyers.' 

The sale marks the latest move in Philips' effort to find new owners for its beleaguered lighting division, which has struggled financially as it shifts from traditional lighting including incandescent bulbs to modern, digital lighting including LEDs and OLEDs.  

Philips CEO Frans van Houten said last September that he would 'seek independence' for the lighting group and would explore different ownership options.

While Philips has said it will not outright sell the lighting group, that is not apparently the case for the group's OLED unit.

OLEDs – organic light-emitting diodes – are meant to be the next big thing in lighting, replacing LEDs as light sources. They are patches of material that emit light, that do no require a heat sink, and that would liberate lighting from the bulb form factor. Proponents believe they will be built into the fabric of luminaires, buildings, furniture, textiles, and many other other things.

But developers have struggled to lower their manufacturing costs and to match the energy efficiency of LEDs – a troublesome shortcoming given that energy efficiency represents the chief selling point for LEDs, which tend to come in more conventional bulb form factor but which themselves are emerging in innovative designs.

'While consumers might now be beginning to see the lighting benefits of OLED panels, the much anticipated tipping point for the technology is not yet ready for the market,' Mike Hornung, a London-based analyst with market research firm IHS, said in a note.

'The overall short- to medium-term opportunities for the OLED lighting market remain in the balance,' he continued. 'The reasoning behind Philips’s decision to exit the OLED market might simply be a case of priorities. After all, Philips has experienced a year-over-year 3 percent decline in their lighting business. With an industry as volatile and unpredictable as OLED lighting, it is likely being sold so they can  concentrate on slowing the decline of their core lighting business and strengthening their position in their growing LED lighting business.'

While OLEDs are gaining acceptance as electronic displays – Apple will use them in its upcoming watch – they remain behind schedule as a rival to LEDs as a general light source.

IHS said in a report late last year that OLED developers would continue to struggle to close the gap.

LG Chem, a leader in OLED technology, this week told Lux that it will not be able to ship volume products that match today's LED efficiency until at least April of next year, a setback to earlier plans under which the company was to have begun shipments three months ago.

The +Plastic story said that Philips' Aachen, Holland based OLED group is 'continuing with business as usual, including the commercial rollout of new products like the Brite FL300 white OLED lighting panel.'

It cited a Philips spokesperson who said that the sale of the unit will help it in 'bringing OLED [lighting] to the mass market, which we expect to kick in by 2016/2017 at the latest.'

While the OLED market is still expected to grow on the strength of design appeal and other factors, it is not expected to truly take off until developers advance the efficiency, which is today only a little more than half of LED efficiency. OLEDs also do not yet match the purported longevity of LEDs.

Because these light sources are both eventually meant to last for 10 or 20 years or longer, lighting companies like Philips are shifting away from the conventional 'replacement bulb' business model and instead relying on selling lighting services that leverage the digital nature of LEDs.

Digital connectivity opens the way to remotely control lights in all settings - homes, highways, offices, public places and anywhere that electronic networks such as the internet reach. It also means that lights and sensors connected to them can become key components of intelligent data networks, such as those emerging in 'smart cities,' a prospect that presents great opportunities but which also raises questions about security and other issues.

Meanwhile, other technologies, like laser diodes advocated by Nobel prize winner Shuji Nakamura, loom on the horizon.

This story updates an earlier version, adding confirmation from Philips. Updated at 10:55 GMT Feb. 19, 2015.

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Photo is from Philips via Flickr