The LED lighting industry : a case study with Philips lighting

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The LED Lighting Industry

A case study with Philips Lighting

Sophie Xiaoqiao Yang

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The LED technology was invented more than 60 years ago while it was only commercialised in the recent years in the general lighting industry. Since its commercialisation, the LED lighting industry has increased its size with a dramatic speed and incredible size. Many predict that the LED lighting is going to be the single dominant lighting source in the near future. LED lighting claims to have many benefits compared to the traditional lighting sources. These benefits are for example, its energy efficiency, longer lifetime and controllability in brightness and colour. In the LED lighting industry, the biggest player is Royal Philips Electronics, headquartered in Eindhoven, the Netherlands. To better understand the industry, a qualitative study was conducted by interviewing employees currently working for Philips Lighting. In this research, we ask the question of where is the LED lighting industry heading towards in the future and what should Philips

do in order to keep its leading position in the market? Through the face-to-face interviews and telephone

interviews, many topics as well as challenges emerged. Although there are certain limitations to this research, a general overview of the industry was obtained.

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1. Introduction

Since incandescent light bulbs were commercialised in the late 1800s, electric lighting sources have been an imperative part of everyday life in most regions of the world. Light’s importance in daily lives cannot be overstated: in homes, schools, offices, operation rooms in the hospitals and most recently, smart phone screens. Life without electric lighting is unimaginable. Thomas Alva Edison, famous inventor of the electric bulb was the first to be recognised and awarded a patent by the United States for the Electric Lamp in 1880. Since then, various kinds of light sources have been invented and commercialised. These include halogen lamps which are commercialised in the 1960s and compact fluorescent lamps(CFLs) in the late 1990s (American Lighting Association 2012).

The most recent technology in the lighting industry is the LEDs or the Light Emitting Diodes. The LED lighting sources have become increasingly popular in the recent years and the LED technology is used in more and more lighting projects. One of the most famous example of prominent installation projects using the LED technology is the British Airways London Eye in 2006. The London Eye is the world’s largest observation wheel at nearly 450 feet (135 m) high, and is visited by more than 10,000 people daily. The London Eye changes colour and illuminate the city at night with the LED lamps installed (ColorKinetics 2007).

The LED technology itself was introduced in the 1960s, however, it was not commercialised or used as everyday lighting sources until recent years. One of the most important reasons the LED technology has gained much attention is its claimed benefits compared to the traditional lighting sources. For example, the LEDs is said to be more environmentally friendly compared to the traditional lighting sources because of its energy efficiency and longer life cycle. It is said that it can save up to 80% of the electricity used by incandescent bulbs and up to 50% of fluorescent. The operational life of LED products is 4 to 40 times longer than the traditional lighting (American Lighting Association 2012) It is also more cost efficient in the long run because of its longer life although LEDs has much higher initial costs than the traditional lighting.

The LED lighting industry slowly took off after the first high-brightness blue colour LED which was more suitable for general lighting uses was demonstrated in 1994 (Mills 2008). The number of patents issued related to the LED technology has experienced significant increase in the recent decade. From just 22 filings in 1990, the year 2000 saw the number jump to 80 and shoot up to 1700 in 2009 indicating that the LED

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technology has gone from “dormant” to “very hot” in the very recent years (Patent iNSIGHT Pro 2010). Not only from the number of patents but the growth of the LED lighting industry can also be noticed from the consumer market as we see more and more LED lighting bulbs on the shelf spaces in shops in the recent years.

The LED industry is an important industry to study because of its very fast-paced growth and future growth potential. According to an analysis by Philips (2014), from first quarter of 2011 till the third quarter of 2013, global LED market value share in lamps has increased from 7% to 20%. McKinsey (2012) has calculated that “the global lighting market is expected to have revenues of over EUR 100 billion in 2020, with 5% annual growth from 2011 to 2016 and 3% growth p.a. from 2016 to 2020.” McKinsey (2012) also predicted that “the advent of LED—only the fourth lighting technology in the history of humankind—is set to transform this industry”. ATKearney(2011) has even predicted that by 2020, the LED share of the lighting market could realistically reach 90 percent. It is thus important for companies in the market to have a good understanding of its development and even predict where the industry is heading towards at an earlier stage of the development of the industry.

In this research, in addition to the study of the industry in general, a specific focus was also chosen: Royal Philips Electronics N.V. in order to have a deeper understanding of the industry. The company was chosen as a specific subject of study for two main reasons. First, not only is Philips Lighting the biggest lighting manufacturer, it is currently (in 2014) also holding the biggest market share in the LED lighting market in the world (The Climate Group 2013). They are also actively increasing their share in the LED lighting within the existing lighting portfolio with a plan to completely move into LED lighting in the future (Philips 2014). Another reason was because of convenience of the research. Philips Lighting has its research and marketing department headquartered in Eindhoven, the Netherlands and the location was convenient to access for studies.

The aim of this research is to study the LED lighting industry as a whole and to answer the question:

where is the LED lighting industry heading towards in the future and what should Philips do in order to keep its leading position in the market? This research question was chosen because although there are many

studies or market reports about the LED lighting industry available, the focus is mostly on the numbers: prediction about how much the LED lighting will grow in the future but no studies were found which answers the questions of what should companies do in order to gain a competitive position in the LED

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lighting market. There were certainly no information available about Philips’s strategy in the LED lighting industry although current numbers were found on its websites.

This research will be based on data from two kinds of sources: one is the literature available from the web and printed literatures. These literature was studied in order to study the industry in general and also to obtain information of Philips Lighting. The other is face-to-face interviews and telephone interviews conducted to current Philips Lighting employees. More in-depth questions regarding Philips’s strategy in the industry was asked during the interviews and through the phone calls.

The research paper is structured in the following manner: first, an overview and description of the LED lighting industry is analysed, then we will analyse Philips Lighting in specific, using data from outside sources and also the results from the interviews conducted for this study. In the discussion section, a strategy for Philips in the LED lighting will be discussed. We will conclude with the answer to the research question proposed.

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2. The LED technology

2.1 What is the LEDs and the history of LED technology

The LED or Light Emitting Diode is a semiconductor device that emits visible light of a certain colour. Light as we understand is a form of energy which is visible to the human eyes and diodes are devices consists of a semiconductor material. LEDs are made up of semiconductor material which produce light owing to the movement of electrons within it, when connected to a power source. The colour of the light will depend upon the chemical composition of the chip.

The first LED reported to be created was in late 1920s, however, no practical use was made of the discovery for several decades after its creation. In 1962, the first practical visible-spectrum red LED was developed by an employee named Nick Holonyak Jr., working at the General Electric Company. Holonyak is the “father of Light Emitting Diode” (Zheludev 2007). Earlier LEDs were first introduced as a practical electronic component. Early LEDs emitted low-intensity red light which was not useable for general lighting purposes, but modern versions are available across the visible, ultraviolet and infrared wavelengths, with very high brightness (white light). Later in the early 1970s, “yellow LEDs” was invented with the “red LEDs” improved in terms of brightness. In 1976, T.P. Pearsall created the first high-brightness, high efficiency LEDs for optical finer telecommunications by inventing new semiconductor materials specifically adapted to optical finer transmission wavelengths (Colorkinetics 2007). Up until 1968, (red) LEDs were extremely expensive, with U.S. $200 per unit, so it had little practical application (Colorkinetics 2007). In 1968, Mosanto Company succeeded in mass producing the visible red LEDs which were suitable for indicators. Hewlett Packard (HP) also introduced LEDs in 1968. Although red LEDs were mass produced, the white LEDs which are suitable for general lighting uses were first brought into mass production by Nichia in Japan in 1996 (Chen 2011). Subsequently, other LED companies, e.g., Osram, Agilent, and GEL core, started to focus on the research and development of white LED. They also possess the ability of mass production of white LEDs after 2000 (Chen 2011).

2.2 Characteristics and benefits of the LED lighting

An LED is fundamentally different from conventional lighting sources such as incandescent, fluorescent or halogen lamps since it lacks a filament of any kind. LEDs present many advantages over

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incandescent light sources including lower energy consumption, longer lifetime, improved robustness, smaller size, faster switching and greater durability (Lighting University 2014). LEDs can be five times more energy efficient than their incandescent and halogen counterparts. LEDs is also said to have a lifetime of up to 20 times longer than fluorescent lamps. RGB and tunable white light LEDs can produce millions of colours without gels of filters which is also unique to the LED lightings (Pimputkar et al. 2009). LEDs also ado not emit infrared radiation and can be installed in heat sensitive areas. Unlike other lighting sources, the LEDs does not emit harmful UV radiation and thus does not degrade materials or fade paints or dyes. It can also operate in extremely cold temperatures and can withstand impacts and vibrations (Lighting University 2014).

The most important benefits of the LED lighting that is stressed is its impact on the environment. It is said that the LED lightings are environmentally-friendly than the traditional lighting sources. The lower energy consumption, greater energy efficiency, longer lifetime all contribute to this aspect. In addition, LED lighting do not contain hazardous materials such as halogen contained in the halogen lamps.

Another important feature LED lighting has is its controllability. LED lighting is digital, meaning they can be easily programmed and controlled by digital systems. There are a number of products such as the Philips “connected lighting” product HUE, with which the colour, brightness of the light bulb can be controlled wirelessly through an mobile app (Porges 2012).

2.3 Applications

There are countless LED lighting applications. LEDs today can be found in almost any application, especially where comparatively small light packages are required and where simplicity and compactness are favoured. In fact, at present, white LED is extensively applied to backlight of cell phone, personal digital assistant, LED screen and more. Some other LED application areas include:

• Residential: including permanent fixtures as well as portable plug-in fixtures such as table lamps. • Office: office building lights, lights installed at educational organisations, health care institutions etc. • Retail: display lightings, decoration lightings etc.

• Hospitality: general lightings for hotels, restaurants, cinemas etc. The lightings can be for example decorative lightings and mood lightings.

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• Industrial: general lighting in factories, warehouses etc. • Outdoor: street lights, tunnel lights, parking lots, stadiums etc.

• Architectural: any kind of illumination of building structures and can be both functional and decorative. It can also be outdoor lighting or indoor lighting.

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3. The LED lighting industry

3.1 Overview of the industry growth trend through the analysis of patents

Patent data is helpful when try to discover the trends, gaps and opportunities that exists in a certain industry. It is also applicable for the LED lighting industry.

When we look at the patenting trend in the LED technology, we can see that the number of patents filed climbed drastically only in the recent decade: throughout the years between 1950 until 1999, the number of patents filed related to the LED technology was under 50 per year. In 2001 it saw a big jump where more than 100 patents were filed in that year. In 2009 it shot up to 1700, which means more than 15 times increase in 8 years. In 2013, a total of 1950 patents related to the LEDs were issued. By July 2014, the total number of patents (U.S. patents only) issued regards to the LEDs count up to 12,056 patents in total. The number of patents seems to be growing continuously, the number of patents issued until July 2014 has been almost 1000 patents.

3.2 Reasons behind the growth of the LED lighting industry

As we can see from the patent issuing trend, the LED lighting industry seems to have started growing around the year 2001 and experienced a incredible leap in growth in the year 2008 when more than 1000 patents were issued per year. There are many reasons behind this industry “inflexion point” where a sudden and significant change in industry occurred. There are three main reasons for this growth: the contracting price of LEDs, energy efficiency regulation/awareness and governmental supports.

The decreasing LED price. Heavy investment from various companies is cutting costs of LEDs at a rate of 30% annually and LED is becoming a broadly affordable technology (Philips 2014). The reduction in price of the LEDs is triggered by many factors. One of the reasons is huge investments in LED chip/package production lines in China which created a considerable overcapacity and built up of the LED chips and packages (McKinsey 2011). In some countries, the price of LED lamps is expected to become competitive with CFLs (Compact Fluorescent Lamps) as soon as 2015 which will further speed up the transition from CFLs to LEDs (McKinsey 2012).

Increase in energy efficiency regulation/ awareness. In many countries, especially in China and in Europe, regulation roadmaps to phase out inefficient light bulbs will also contribute to and speed up the LED

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market share in residential applications (Matulka 2013). China has recently amended a proclamation to ban incandescent light bulbs which is backed by the country’s energy conservation law (China 2007). Europe is also further accelerating the switchover to more ecological lighting sources by extending its regulations to ban low-voltage halogen lamps. The European Union (EU) has also ruled that by 2020, all new building structures should consume “nearly zero” energy (European Council 2012). Australia has completely banned incandescent lamps from the end of 2010. Some states within the United States has aggressive timelines to ban the incandescent lamps, such as California looking to ban all incandescent lamps by 2018. In addition to environmental regulations, greater awareness of energy efficiency is promoted across geographies through, for example, energy efficiency classifications. These include BREEAM in European Union, CASBEE in Japan, and standards for green construction in China (Japan Green Build Council 2014).

Governmental supports. National as well as local programs supporting the LED installations is also a great reason behind the growth of the LED lighting industry. For example, New York city will convert 250,000 streetlights to LEDs in a 76.5 million dollar project set for completion in 2017 (US Department of Energy 2012). Shanghai also plans to replace all city road lighting in the coming years to LED lightings (Ma 2013).

3.3 LED lighting market in different lighting applications

The LED lighting market size overall is anticipated to be around 37 billion euros in 2016 and 64 billion euros in 2020.There are three sectors in lighting: general lighting, automotive lighting and back lighting.

General Lighting. This is the largest lighting market with total market revenues of approximately 55 billion euros in 2011. This represents around 75 percent of the total lighting market. It is expected to rise to around 83 billion euros by 2020, that is, around 80 percent of the total market (McKinsey 2012). It includes many applications listed in the previous chapter in this paper: residential, office, retail, hospitality, industrial, outdoor and architectural.

• Residential. Among the different applications, residential has the largest application market in the general lighting segment, represented almost 40 percent of the total general lighting market in 2011.

• Office. The second largest application market n general lighting is office lighting which accounted for around 15 percent of the total general lighting in 2011.

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• Outdoor. The third largest application in general lighting is Outdoor and it accounts for more than 12 percent of the total general lighting market in 2011. This application is unique in that it is more likely to be influenced by public policy interventions such as governmental and municipality decision makings. LED market share in the outdoor segment is expected to grow close to 45 percent by 2016 and more than 70 percent by 2020.

• Architectural. Architectural application is the early adopter of LED. It has a LED market share estimated at close to 50 percent in 2011. This share is expected to be more than 75 percent by 2016 and close to 90 percent by 2020.

• Hospitality. The current LED market share is estimated at around 9 percent and is expected to grow to close to 45 percent by 2016, increasing to around 80 percent by 2020.

• Retail. Currently, LED market share in the retail application is estimated at around 7 percent and is expected to grow to more than 45 percent by 2016, increasing to as much as 70 percent in 2020.

• Industrial. The industrial segment is the slowest mover to LED, with LED market share still at 4 percent in 2011. The LED market share is also expected to grow at a more slower pace than the other applications: rising to around 20 percent in 2016 and 40 percent in 2020. This is because, similar to the office application, existing technologies such as fluorescent and HID (high intensity discharge) already has relatively high-efficacy performance, thus the benefits of the LEDs is not significant.

Automotive Lighting. The automotive lighting market is growing steadily. The 2011 market size is estimated at 14billion euros, representing approximately 20 percent of the total market. This is expected to climb to 18 billion euros by 2020 (McKinsey 2011).

Backlighting. It is estimated that the backlighting segment have revenues of almost 4billion euros in 2011 (McKinsey 2011).

3.4 LED lighting industry in different geographical areas

Although the LED lighting industry is expanding globally, the growth of the LED lighting market is different among geographical areas due to factors such as governmental support, regulations, market structure etc. Looking at the patents issued related to the LED technology, the U.S., China, Japan, Germany

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and Korea make up the top 5 locations geographically leading the innovation. Here, we compare the major markets for the LED lighting industry: Europe, Asia and North America.

Europe

According to the European Commission, in 2010, the global lighting industry had revenues of $90 billion and this number will grew to $130 billion by 2020. In Europe alone, the industry is estimated to have revenues of $25 billion and employ over 150,000 people. The LED value based market share in Europe is estimated at around 9 percent. This share is expected to rise to over 45 percent by 2016 and more than 70 percent by 2020. There are multiple factors that affect the LED markets in Europe. The macroeconomic situation in Europe is a factor that prevents the growth of the LED lighting industry. As Europe is the region most affected by the recent financial crisis, the general lighting market is affected because there might be less construction which means less lighting installations. On the other hand, the nuclear phase out plan in Germany and European Commission’s regulation on banning low-voltage halogen lamps are expected to drive higher LED penetration in Europe (European Lamps Companies Federation 2012). Overall, as the price gap between the LEDs and the CFLs is becoming smaller and smaller, and as more and more shelf spaces are becoming available for the LED products, the sales of LEDs will continue to grow in major European markets.

Asia

Asia represents the largest regional market in overall general lighting as well as LED general lighting. The penetration of LEDs in Japan and in China has been especially fast in the region.(McKinsey 2012).

In Japan, the awareness to save energies grew after the Fukushima nuclear disaster in 2011. After the disaster, there were severe energy shortages and how to save energies became an important debate within the Japanese government. There are also many large players in Japan that are in the LED lighting field such as Nichia, Matsushita Electric, Koito Manufacturing, Toyoda Gosei. These companies are active in the research and development as well as the production of the LED technology (Philips 2014).

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China is one of the countries that are most enthusiastic about the transition into the LED lighting. It has become the major growth momentum for the global lighting market (LED inside 2014). Although the ambitious 2013 national program was not fully implemented and the 2014 program is not ready yet, the focus on LED adoption continues in this country (Philips 2014). LED market is growing fast while the conventional market is on a steep downtrend. On the national governmental level, China has supported the transition into LED by subsidies for the new technologies and regulations/banning the traditional technologies. In 2013, the subsidies for the CFL-I (Compact Florescent Lamp) was drastically cut by the Chinese government which indicates the government’s determination to focus on the LED technology (Philips 2014). China has also passed legislation to ban incandescent light bulbs (McKinsey 2012). At the province and at the city level, ambitious local plans are continuing to stimulate the LED lighting adoption as well. The city of Shanghai, for example, is planning to replace all city road lighting in the coming years with LED lighting (McKinsey 2012). The support of the national and the regional level further stimulate more manufacturing companies entering this market, making the price competition in China more intense in the coming years. It may further drive down the LED prices globally because of this competitive environment (LED inside 2014).

North America

In North America, faster LED price erosion is supporting the accelerated uptake of the LED market. However, the current shale gas revolution in North America could lower overall energy costs, including electricity retail prices which will have a negative impact on the expansion of the LED market in the region (Philips 2014). Overall, currently, the adoption of LED lighting is increasing with continuous phase out of incandescent lighting and growing number of LED streetlights.

In the United States, the degree of support for the LED adoption varies among different states. However, a growing number of large cities are upgrading their streetlights to the LEDs. For example, Los Angeles recently finished replacing up to 141K streetlights to LED lights (City of LA 2014). New York city will install 250,000 LED streetlights and is set for completion by the year 2017. The program in the New York city will be the largest conversion project in the U.S. and it began with pilot tests in 2009. Other major U.S. cities upgrading to LED streetlights include Seattle, Las Vegas, Austin and San Antonio and more cities are expected to join this trend in the future (Philips 2014).

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Other parts of the world

The rest of the world: Latin America, the Middle East and Africa makes up a much smaller share than the other regions in terms of both the size of general lighting as well as their size in LED general lighting markets (Philips 2014). The value based LED market share in 2011 is estimated at 4 percent for Latin America and 5 percent for the Middle East and Africa combined. One of the reasons might be that the import duties on lighting fixtures are high in Latin American countries. The unit cost for a LED fixture can therefore become even more expensive unless production facilities are locally available (McKinsey 2012).

3.5 The value chain and major competitors

There are five main stages in the LED value chain. The strategies differ depending on where a company stands in the value chain.

1. Component production (chip, array) 2. Lamp production

3. Light fixture production 4. Lighting design

5. Installation services

There are mainly two types of companies in the industry: one is bigger sized lighting companies that has a diverse portfolio with different lighting instruments and not only LED lighting but also traditional technologies. Examples are Osram, Philips Lighting, GE, Toshiba etc. Their core business is usually broad: focused on the first four stages in the value chain, namely, component production, lamp production, light fixture production and lighting design. The other type of business is focused on the niche: only the LED technology and/or only one part of the value chain. These companies include Cree, Inc. whose core business is in component production and lamp production. Nichia is also focused on LED and other semiconductor devices whose core business is in component production. There are also many smaller construction and engineering firms entering the industry focusing on the lighting design and/or the installation services segment.

It is also a trend that more and more smaller sized companies entering the market, seeing the opportunities in the LED industry. Only between the year 2008-2010, a total estimated $800 million of

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venture capital was invested in the lighting technologies, not including the considerable investments by established players such as Cree, Inc., Osram and Philips Lighting (McKinsey 2011).

3.6 Competitive Strategies

The sudden emergence of the LED technology in the lighting industry had different effect on companies.

Established manufacturing companies. For more established lamp and lighting fixture manufacturing companies, such as Philips Lighting, Osram or GE, it meant not only adding the LED lighting in their existing portfolios but also changing the strategies they had or even creating entirely new business models. One of the trend for these established companies is vertical integration along the value chain in which they try to expand their positions in the market. An example of this will be GE acquiring an Israeli company specialised in LED called Lightech (GE Lighting 2011). Cross licensing, strategic alliances as well as partnership is also a growing trend among these companies. For example, Philips and Cree, Inc. agreed on a comprehensive LED patent cross- licensing (Cree, Inc. 2010). Also Sharp and Osram also entered into LED and Laser Diode cross licensing agreement (Sharp 2013). Still others buy components and assemble, specialising in key sub segments which is a trend that is likely to continue in the coming years (ATKearney 2010).

Light fixture manufacturers. Much less changed is experienced by the light fixture manufacturers such as Zumtobel and Lithonia Lighting. This is because the change of technology is only limited to the light source itself. However, it is noteworthy that established manufacturers are acquiring the light fixture companies. A good example would be Philips’s acquisition of Genlyte, which was previously the second largest light fixture manufacturing company in North America (Philips 2007).

New entrants to the market. Many new players have entered the market seeing the potential of the LED lighting industry in the future. Most of them are from the semiconductor industry or television manufacturers such as the rather late entrant into the LED lighting industry: Sharp and Panasonic (ATKearney 2011). For the new entrants, they have to face many challenges such as how to solve the issue of capital-intensive chip production process or how to solve the intellectual property issues. Most importantly, they need to find a strategy in order to win the battle with the existing players in the market such as Cree, Inc., Nichia, Philips

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and Osram. However, it is also important to realise that there are great chances in the LED lighting design and LED lighting installation services. Given the LED lighting’s unique characteristic such as to be able to change colour and other technological flexibility, numerous design and application of the technology is possible. What’s more, for these segments, not much start-up capital is required compared to the other segments in the value chain and great amount of profitability can be expected in the future.

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4. Philips Lighting

4.1 Company profile

Founded in 1891 in Eindhoven, the Netherlands, by the Philips brothers, Philips or Royal Philips is a diversified health and well-being company, focused on “improving people’s lives through meaningful innovation in the areas of Healthcare, Consumer Lifestyle and Lighting” (Philips 2014) . Its global

headquarter located in Amsterdam, the Netherlands, the Philips group posted 2013 sales of EUR 23.3 billion and employs approximately 115,000 employees with sales and services in more than 100 countries (Philips 2014). Mentioned in Philips’s mission, Philips has three main business lines: Health Care, Consumer

Lifestyle and Lighting. For its health care business line, Philips manufacture medical products such as X-rays and ultrasounds equipment. It also provide consulting services for the health care industry. The Consumer Lifestyle business line sell consumer products such as electronic shavers, coffee machines and televisions. The Lighting business line sells lamps, lighting fixtures and lighting control systems. Philips on its influential “50 Most Innovative Companies for 2014” list, as well as in the top 10 of the “Energy and Internet of Things” subcategories (Philips 2014).

As mentioned above, Philips Lighting, as a part of the Royal Philips, has a history of more than 120 years in the lighting industry. Philips Lighting, as well as the other two businesses are managed separately, focusing and developing on its own business strategy as well as research and innovation. Philips Lighting’s headquarter is located in High Tech Campus in Eindhoven, the Netherlands.

4.2 Product range

Philips Lighting’s products spans across the entire lighting value chain – from lamps, lighting fixtures, electronics and controls to full applications and solutions. Philips Lighting has therefore many different business categories from products to services: light sources, lighting controls, lighting services, automotive products, solar lighting, special lighting, OLED (organic LED) lighting, OEM etc.

Philips Lighting has a diverse range of products for different consumers and for different

purposes/needs. Lamps, for example, Philips has traditional lighting sources such as incandescent lamps, fluorescent lamps, CFLs (Compact Fluorescent Lamps) as well as LED lamps and systems. For different

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purposes, Philips also have different solutions for different purposes. There are special products for different uses such as special product for application in the office, garage, entertainment, retail stores, roads and tunnels, sporting facilities, healthcare etc.

For its LED lighting products, Philips is in all sectors along the value chain. Philips offers products such as LED components, LED modules, LED bulbs and LED lighting fixtures. For services, Philips offers from designing to installation (Philips LED Lighting 2014).

In the LED lighting products, Philips has a focus on the controllable characteristic of the LED lighting which they call the “connected lighting” systems. An example of the consumer products is the personal wireless LED lighting system called “HUE” which was launched in 2012 (Philips New Room 2012). With the digital lighting control system, the colours, brightness can be controlled remotely by using a mobile app.

4.3 Development in LED

Philips has been one of the established lighting manufacturers that has seen the opportunities or market trend in the LED lighting and entered the market in an earlier stage. Philips acquired smaller sized companies that were specialised in the LED technology early on. It puts focus on innovation in the technology and also has many partnerships or cross licensing agreements with other lighting companies. In order to promote its LED products, Philips conduct education marketing in order to educate the market about the benefits of the LED technology as well.

Acquisition/ Subsidiaries. Over the years, Philips has strategically acquired many companies specialised in the LED lighting in order to enlarge its LED lighting portfolio and gain more manufacturing capacity. Here are some of the examples.

• Lumileds. (2005)

Used to be a part of HP (Hewlett Packard), now is called Philips Lumileds Lighting Company. It is a fully integrated manufacturer of LED dice, packaged LEDs, and high-brightness LEDs—LUXEON®—designed for integration into general lighting products (Lumileds 2014).

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PLI is focused on home lighting fixtures and systems while TIR is focused on solid state modules (Philips News Room 2007).

• Color Kinetics. (2007)

Philips Color Kinetics offers professional LED lighting systems. It provides colour-changing, tuneable white, solid white, and solid colour LED lighting fixtures, digitally controllable light in the full range of interior and exterior architectural and entertainment applications (Color Kinetics 2014).

• Genlyte. (2008)

In order to control lighting fixture production, Philips acquired the former second largest lighting fixture manufacturer in North America.

Partnership/ Cross Licensing Agreements. Intellectual properties is a very important factor that determines the success of companies in the LED industry. Philips has signed many cross-licensing agreements over the years with its major competitors such as with Osram in 2008 (Osram 2008) and with Cree, Inc. in 2010 (Cree 2010).

Education marketing (Edu-Marketing). Philips conduct edu-marketing in which it tries to provide knowledge about the LED technology to its consumers. One of the edu-marketing program they have is called the Lighting University. It is an online-program available to the public on its Philips Lighting website. Lighting University provides different kinds of LED lighting education programs such as the LED certification program where you can take four levels of courses depending on your needs. You can get certified after taking the web or in-classroom courses and finished the tests that follows. The aim is to educate the public with different needs: general consumers, students interested in career in lighting, professionals in lighting, marketing personnels etc (Philips Lighting University 2014). Other edu-marketing tools include Philips Luminous Magazine (Luminous Magazine 2014) in which Philips introduces the recent development in the LED lighting industry and the LED projects around the world that is done by Philips.

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4.4 Market position in LED lighting

Philips Lighting is the biggest lighting manufacturer in the world, it is currently (in 2014) also holding the biggest market share in the LED lighting market in the world (The Climate Group 2013). Philips’s position in the LED lighting market depends on different geographies, product types (lamps, lighting fixtures etc) and market segments (professional and consumer market).

Lamps market. Up until Q3 2013, LED market value share for Philips increased up to 20%, up from 7% in Q1 2011 (Philips 2014). In mature geographies, there were limited development in professional market in both North America and major economies in Europe such as France or Germany. On the other hand, the consumer market is growing in Europe while in North America it is relatively flat. In growth geographies, a general uptrend in LED lamps market can be observed. This growth is mainly driven by China and ASEAN (Association of South East Asian Nations) countries (Philips 2014). There are also many challenges that await Philips in this market. For example, in only one year from Q3 2012-Q3 2013, the prices of 40W and 60W equivalent bulbs have dropped up to 30%. Almost all key players in the market are offering entry level LED bulbs below $10 in the U.S. and in Europe. There are also many private labels on the rise in Europe.

Lighting fixture market. A substantial growth was observed for the LED in professional lighting fixture market in all the regions which continued into Q3 2013. It reached 33% in Q3 2013 and was 7% increase compared to Q2 2013. Year-on-year growth in LED reached up to 45% in 2013. On the other hand, the LED value share in consumer lighting fixtures market has been flat since Q1 2013.

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5. Methods

In order to better understand the development of the LED lighting industry and obtain updated information about Philips’s business in the LED lighting, qualitative studies, namely, personal interviews with current employees at Philips Lighting were conducted for this research. Two methods were applied in this interview process: one is face-to-face interview and the other is phone interview. Face-to-face interviews were preferred than phone interviews, however, some interviewee were not available for a face-to-face interview appointment. The interviewer found the interviewees through two separate LinkedIn groups called “Innovations in Light” and “LED professionals”. “Innovation in Light” group was established by Philips Lighting, therefore, many employees from Philips Lighting were in the LinkedIn group. The interviewer selected potential interviewees in the group who were responsible for functions related to the LEDs in Philips Lighting and contacted them through LinkedIn emails. Interviewee A replied and agreed to have the interview. Interviewee B and C were introduced by interviewee A because they all work in the same area in LEDs.

For face-to-face interviews, the interviews took place in May 2014 in the Philips Lighting headquarter in High Tech Campus, Eindhoven, in the Netherlands. Two face-to-face interviews were

conducted and both interviews took approximately 30 minutes. Both interviewees were currently working for the marketing department of Philips Lighting which not only manages the marketing activities in the

Netherlands but also oversees the marketing activities in all Philips Lighting offices abroad. For privacy reasons we will call the three interviewees A, B and C in this paper.

The first interviewee A is in the marketing strategy department and he is the head of the global Channel Partner Program. He has worked for Philips lighting for four years. He has been in the current role for one and a half years. In this position, he started the new project team called “Channel Partner Program” in which he coordinates and assists local Philips offices acquire more partnerships in LED lighting projects. Before taking the current position, Interviewee A was first a program manager for one year and a half and then became the senior global manager of Philips Lighting for more than one year before taking the current position. In the program manager role, he was responsible for the edu-marketing of LED technology and managed the LED knowledge transformation program. In the senior global manager role, he was responsible for arranging LED marketing programs for key accounts, large wholesale customers and strategic partners. Before working for Philips Lighting, he worked for different IT companies for about nine years in total

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The second interviewee B is also in the marketing department where he manages the LED edu-marketing. He has worked for Philips Lighting for 2 years. He help developed and managed LED certification program for large wholesalers. He also have background in IT sectors.

For the telephone interview, the interview took place in June 2014. The interviewer called

interviewee C in his office during his work hours. The interview took about 20 minutes. Interviewee C has worked for Philips Lighting for four years in total. His current job title is global B2B insights manager in which he manages global B2B relations. He has been in the current position for two years and a half. Previously, he was the global market intelligence manager for one year and a half. In this role, he was specialised in the application area in retail shops and in hospitality. He was responsible for the marketing intelligence globally. Before working for Philips, Interviewee C was working as consultant for different companies for 8 years in total.

For all interviews, a semi-structured interview was conducted. Interviewees were asked questions with same themes but when new topics came up, interviewer was open for non-scheduled questions. Before starting to ask interview questions, interviewer first introduced herself and explained the purpose of the research as “trying to understand the LED lighting industry and understanding Philips Lighting’s strategy in it”.

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6. Results

There were several themes that came up in the interviews. They are: the reason of entering the LED market, importance of LED for Philips, the internal transition in Philips, strategies in the LED lighting and challenges.

Reason of entering the LED market

From the answers by the interviewees, there were several reasons behind entering the LED market, main reason being governmental regulations.

• Governmental regulations

In many countries or regions, conventional technologies are being banned for environmental regulations. Philips sees this trend and sees that the future of lighting will be the LEDs.

Interviewee B talked about regulations as one of the reasons Philips focusing on the LED market:

“It wasn’t something that Philips picked up that is just new but really what sort of created the vacuum for the LEDs is the regulations. Because the environmental regulations are slowly banning the conventional sources of lighting which are not sustainable. So that’s what has really created the need for the LEDs.”

Importance of LED for Philips

From the interviews, all interviewee expressed that LED is the central focus for Philips Lighting compared to the traditional technologies. Philips has recognised the importance of LED technology in the lighting

industry early on and scheduled the transition process.

Interviewee A talked about Philips’s planning in earlier period:

“Philips wise, it was expected: we are the pioneers of getting the transformation started in the LEDs, my job started three years back, we acquired a complete LED company in 2007 so we started acquisition quite early and we knew that by 2020, 85% of the lighting market would be LEDs.”

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“I think if you go our LinkedIn community, they only talk about LEDs, that is the way it will turn out. It will grow, slowly but surely. All our marketing power is supporting the LEDs.”

Internal transition

• LED certificate program for employees

An educational program for the employees at Philips were developed starting from 2011 in order to help the internal transition into the LED technology. It serves to help different levels of employees understand the technology. There are four levels in the program and the employees were assigned different levels according to their job functions. Every employee at Philips Lighting was obligated to take the certification program: “LED Passport”.

Interviewee B:

“As a leader in LED lighting, we need to be ahead of the curve, so we should focus on first of all educating our staff sales force of course. So how that’s the LED Passport was made.”

According to Interviewee B, there were four levels:

“Basically all the blue collar and white collar workers have to do the LED Passport. It was more of the sales people that did the Associate, which is sort of the second level. The third is the professional level, that is done by more like the engineers who are really working with the specific product like lighting designers, that is the type of audience it had. And the LED specialists is just for the champions.”

Interviewee A also talked about the scale of the training program for employees:

“We have done a lot of trainings and that was supported by the top tier of the management. They endorsed that everybody has to be trained. We trained 23,000 employees in 2012 on LEDs.”

“All employees, everyone needs to go to this training. Philips Lighting has 23,000-24,000 people. There was a campaign in 2011 called LED Passport and everybody has to have that.”

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Strategies in the LED market

Three main strategies can be highlighted from the interviews: Edu-marketing, Partnerships and Connected Lighting Program/lighting control systems.

• Edu-marketing

Philips understands that because of the sudden emergence of the LED technology in the lighting market, most of the individual/ wholesale customers are not aware of the technology itself. Especially, the unit sale price of a LED bulb is much higher than an incandescent bulb or a CFL bulb. Therefore, instead of direct marketing, Philips uses the tool of “edu-marketing” to educate the market about its benefits over traditional technologies. Philips strategy is to focus on the professional market of the LEDs.

Interviewee B commented about the price of LED:

“In the consumer market, it is extremely hard for Philips to compete because costumers cannot really tell the difference between products and they usually go for the cheapest.”

Interviewee C also commented:

“As a consumer, even though buying LEDs in the long run, it saves you but it has a big initial cost.That is very hard for a consumer to grasp because consumers do not think in longer terms, they just think in terms of today or tomorrow. So in the consumer market, it is extremely hard for Philips to compete.”

“I think when it comes to consumers, they are still a bit skeptical. It is still all about the price game for now. But I think part of that comes from them not having a full understanding or comprehension of the LED technologies yet.”

Philips uses different tools to educate both the consumer market and the professional market. These include the “Lighting University” where people can complete courses on the Philips Lighting website and getting a “LED passport” after completion.

Interviewee B commented about the marketing tools they use:

“I worked last year in a department called the Lighting University. They played a key role in that. By creating the “LED passport” they are really trying to educate the people.”

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The next goal for edu-marketing for Philips is to not only educate people about the benefits of the LED lighting, but to further prove to the customers that why Philips’s LED product is better than competitors’ despite the higher unit price of Philips’s product.

Interviewee B:

“I see it (the edu-marketing) as a three phase process: first you have to raise awareness of the fact that the LED market is there, we have got to that point now. Now we need to educate people to say that why Philips product is better than the competitor’s. Honestly, quality-wise, it definitely surpasses a lot of the competitors, it is very reliable, but the only problem is the price.”

Interviewee C also talked about Philips’s focus on the professional market:

“Only a small part of our sales, say 30% comes from the consumer market. Our focus is more B2B.

Consumers are not the driving force in the strategy, the real strategy comes from the professional market.”

Interviewee C talked about edu-marketing for the wholesalers:

“If you make a million dollar decision, of course you wanna take a course and make a right choice. But if you are buying just a 20euro, 30euro bulb then perhaps an ad will be suffice.”

• Connected Lighting/lighting control systems

Philips sees its opportunity in the connected lighting or digital lighting control systems in which customers are able to control the colours/ brightness of lights through a mobile application or other digital devices. This is because Philips’s strategy is not to compete with price in the LED market but to deliver high quality innovative LED products and services. In order to strengthen this area, according to one of the interviewees, Philips is hiring more people with a background in Information Technology (IT). For example, Interviewee B also worked for an IT company before working for Philips.

Interviewee A talked about the reason they chose to compete in the lighting control is because they cannot compete with products from Asia with extremely low prices:

“Companies coming from China, India, from Asia. They have mass production capabilities and they can product them at a much cheaper rate, so we basically said that, if we want to survive, we have to move to

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digital lighting which is more service or system oriented. System is not only LED, but also controls. The good thing about LED is that it could be controlled. That is why there is a new story that Philips is following: called Connected Lighting.”

Interviewee C also talks about their strategy in moving towards the systems/controls:

“What the competitors do, is they are focusing on lamps,lighting fixtures, chips, what we are trying to do is we are trying to move towards systems and services. We need to move up the value chain, so we are creating sort of blue ocean strategy. We cannot compete with them on lamps and lighting fixture, we will end up in a red ocean strategy. We have a strategy called: “ 40, 40, 20”, so by 2018, we need to have 40% products, 40% systems, and 20% services.”

Interviewee A talks about Philips trying to strengthen its position in the systems market by acquiring companies specialised in this technology:

“We are actually now trying to move into systems company, companies actually not only do LED

manufacturing but doing designing with LEDs. Designing of office space, for example. That is the area we wanna enter the next.”

Interviewee A talks about how they are hiring more employees with IT background to strengthen their systems market:

“We are actually hiring more software people. Most of our top management is from companies like Microsoft.”

• Partnerships

The partnership program, according to the interviewees A and B, officially started in January 2014. Preparations for building the framework took place from June till December 2013. The LED certification program (edu-marketing) were also applied for this particular group of channel partners. The partnership program, according to the interviewees, is also part of the effort to grow the systems/services business.

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Interviewee A explained the functions of the partners:

“They are supposed to do five things in the value chain. They are supposed to order and buy the LED from us, they should be able to call to the customer, they should be able to design, they should be able to commission, commission means installing, basically, and they should be able to do after-sales services.” “We have to work with partners. We will not have enough resources to do a systems project everywhere in the world, with the lighting industry going 200 billion by 2020, something like that, we need to make sure that we have big enough share of the pie. For that, we need to have good partners in place who are doing stuff for us.”

Interviewee A also talked about the importance of partnership in order to grow the systems/services business:

“So that’s why these, typically these are all work of ours, but we call them “value-added partner” just because we know that if we want to grow our systems and services business, these will be the key players.”

Interviewee A talked about the target for the partnership program:

“My financial target for this year is to 20 million, that means that when all the new partners come in, they should be able to contribute to that 20 million. Our long term target is we need to grow systems business which is now 400 million, by 6 billion by 2018.”

“This year’s target is around 200 partners. And in couple of year, we should have thousands.”

• Target regions

Interviewees also answered questions regarding the targeted geographic regions for the LED lighting market. Major developments happens in the growth market in China, Russia, the Middle East, for example. These regions are important for Philips because by conducting edu-marketing to the local government and other big businesses, large installations/contracts can be expected.

Interviewee A talked about the development in the growth regions:

“Our major development happens in the growth market India, China, Russia, Middle East…So those are the areas which are collectively called the growth market and most of the sales or growth happens there. In terms of marketing, we do traditional marketing. We also do a lot of digital marketing. Edu marketing is

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again very important because if we are talking to municipalities or government officials, they want to get educated on what and how will this affect their city or their locality. So we do that a lot. I think in some part of the world, it is rapidly developing. Malaysia for instance, they have just signed a contract with us that they will change all the street lights into LED lightings and that hasn’t happened in the Netherlands yet.”

Interviewee C talks about the importance of the B2B for the business:

“75-80% of our sales come from B2B not B2C.”

Challenges • Internal issues

In the process of shifting the focus towards the LED market, there are internal challenges such as the culture itself or the skepticism inside Philips. Interviewees mentioned there being a tension between the people who work for the LED department and those who work for the traditional technology department.

Interviewee A mentions culture as one of the barriers inside Philips in the transition, the hierarchy is one of the challenges:

“I think it is the culture. We are again, one hundred year old company. There are a lot of hierarchy in this company and that needs to go if we want fast decision makings. And again, that is probably why we have a lot of people coming from the software industry because there things happen fast. The work culture is much better there. It is more flat, non-hierarchical.”

“We have old people who have been working here for the past 20, 30 years in some cases. It is hard to change. Changing so rapidly is very hard. There are more older employees in this company.”

Further, he explains that although they have bright people at Philips, the culture is sometimes a barrier for success and expressed the urgency for change to take place:

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“ We still produce great products, we still have good people. All we need to do is to make sure people should be rewarded for the stuff they do rather than the years they have spent in Philips. That has to be changed. And we need to have the sense of urgency. That is very important.”

Interviewee A talks about the internal tension:

“It turns out that internally, right now the traditional lighting people are competing with the LED lighting people.”

“There is internal competition, but we are managing it. We are taking a gradual process.”

Interviewee A talked about there are people in Philips who worries about their jobs when they move towards the partnership program:

“There are some difficulties, the difficulties are basically that it is a change process: a lot of people when they work with partners, they feel threatened because they feel that well, if we work with partners, what will happen to the internal resources, what might happen to my job etc.”

Interviewee A says that, on the other hand, there are efforts in Philips that is trying to change the situation by having a younger management:

“that is why we have a young CEO, 42, 43 years old.”

• Existing portfolio

Unlike some competitors who are fully focused on LED technology, Philips has a larger portfolio with traditional technology. The need to manage the traditional technology makes Philips not having a full power in competing in the LED market. Moving into LEDs also means that it will have negative effect on the profitability of traditional lighting businesses.

Interviewee A talked about the need to manage the portfolio:

“ There are companies, our competitors, major competitors are only doing LEDs, Samsung in the U.S. , they are only doing LEDs; one of our strongest competitor, called CREE, they are only doing LEDs. So the new

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plans are only doing LEDs but our obstacle is that we have legacy business and we have to slowly move into it but we have all the resources to do that.”

“ There are companies who do not have legacy business, so they do not have traditional technologies, for them it was much easier to grow focusing on the LED, but for us, it would be a complete disaster if we completely stop with our current productions immediately.”

Interviewee B talked about a competitor Cree, Inc.:

“One of the companies in the U.S., Cree, they are really catching up. They are almost able to compete with multi-national. They are strong because they are only focusing on this, but Philips has a very broad portfolio.”

Although Philips is focusing more and more on the LED technology, most of its revenues still come from the traditional technology. Interviewee A talks about this issue:

“75% of the total business a few years back, actually right now as well, was traditional technology.” “Maximum profit comes from the traditional lighting still, LED’s profitability is actually not that high.”

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7. Discussion

In the beginning of this research paper, we have asked the question: where is the LED lighting

industry heading towards in the future and what should Philips do in order to keep its leading position in the market? Through the research conducted previously, other market analysis and market trends, it seems

inevitable that the future lighting market will be dominated by the LED lighting technology while the traditional market such as the incandescent lighting or the CFLs will decline even further. Here listed are important success factors in LED lighting market that cannot be missed for Philips to win in the LED lighting industry.

Managing the transitions:

Not only Philips, most of the big players in the lighting industry will slowly but surely shift towards the LED lighting while shrink the size of their traditional lighting portfolio. For these companies, how well they can manage the change process is the key to succeed in the future lighting industry.

In the interview, the interviewees mentioned the difficulties internally during transition from the traditional lighting to the LED lighting. If the transition process and the importance of transition is not well-communicated to the employees, frustrations or tensions can arise among the employees focusing on the traditional lighting technologies. What is important here, is to map the transition process well and share it with all the employees to make the change process transparent to all employees.

Focus on “smart lighting”:

Unlike traditional lighting, which most of the time is not flexible to change the brightness or colour, what makes LED lighting unique and valuable is its ability to be controlled digitally: the ability to dim the lighting or change the colours by tapping on your phone or through other digital devices. Therefore, the future trend will very likely to be how to control the lighting and design the lighting. Philips’s “connected lighting” strategy is therefore ahead of its competitors for now, however, more and more competitors are quickly following the trend. For example, Samsung and LG has also launched similar controllable “smart lighting bulbs” with which consumers can control the lighting using wireless or bluetooth (Prindle 2014). In order to stay ahead of its competitors, Philips needs to focus more on research and development in this area to have more innovative products in lighting control. We can see from the interviews that Philips is currently

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doing well in this, by trying to hire more employees with an IT background who can bring in new ideas to facilitate the focus on “smart lighting”. Its strategy of “40, 40, 20”: 40% products, 40% systems and 20% services also high lights this focus.

The consumer markets:

As was mentioned in the interviews, “edu-marketing” has been an important theme in Philips’s marketing strategy. One of the challenges to win in the consumer market is the price of LED lighting products. The price of LED products tends to be much higher than traditional lightings. For a consumer, without knowing much about the details of the LED technology, it is not likely that he/she will buy a 15euro LED bulb when a 3 euro incandescent light bulb is available. Therefore, in order to win the consumer market, more marketing to communicate the benefits of LEDs is crucial. For Philips, currently the edu-marketing for the consumers is mostly on its website, where most of the materials about LED is available. However, with this method, not many consumers will be actually going to their website just to learn about the LEDs. More effective way of communication should be sought. On the other hand, the reasons behind not much edu-marketing towards the consumers might be that, as the interviewees have mentioned in the interviews, the main source of revenues for Philips is from the professional market.

The professional markets:

As the interviewees have said during the interview, the professional market is very important for Philips because most of the revenues comes from the professional market because of its large scale. The recently launched partnership program by Philips is a good initiative to further expand in the professional market. By having more partners, Philips is able to even further expand its scales in the LED lighting business. Since Philips tries to have more services as well, more people need to be involved in the business and that cannot be done without the help from the partners.

Edu-marketing is also important in the professional market where large scale projects are initiated. As mentioned in the interviews, by educating the government official, for example, large-scaled installations in the street lighting can be contracted.

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Creating an innovative culture:

Because of the rapid development in the LED lighting technology, constant changes in the strategies or policies have to be made. Being flexible and open-minded to new ideas can be very important when it comes to new strategy implementation and execution. Innovative culture will definitely help a company to succeed as the LED lighting industry becomes more and more systems/services oriented.

From the interviews, we can see though that for Philips, one of the challenge is its culture. There seems to be a structure that is very hierarchical which may hinder the passing of new ideas. There are efforts in the company to change it, however, according to the interviewees, which is to have younger management team and by having more people with IT background.

Product differentiation:

Philips is generally known as a brand with reliable and quality products. For the LED lighting market, same image has to be formed in the eyes of the customers. Compared to many private labels in the LED lighting market, Philips light bulbs are not price competitive. Therefore, it is also important to conduct edu-marketing to the customers why Philips’s LED products are better than competitors.

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8. Limitations and future research

This research tries to have a deeper understanding of the current situation in the LED lighting market and to predict the future trend using Philips as a case study. By interviewing current employees at Philips Lighting, updated information were obtained regarding the industry. However, there are also a number of limitations in the research. First of all, due to limitation in time, only three interviewees from Philips were obtained. The contact process of interviewees was difficult and not many people whom was contacted responded the emails. Many people also responded saying they did not have time for the interviews or they were reluctant to disclose confidential information. Secondly, the people whom interviewed were all from similar areas in the company. Two of them were from the same department and they all worked together before. This may leads to biased or one-sided opinions. Thirdly, although this research was meant to be a case study of Philips Lighting, it would have been beneficial if other competitor LED companies were also interviewed. This way a better picture of the industry may have been obtained. On the other hand, the qualitative study method was the right way for the case study because it showed many important topics that were otherwise difficult to point out.

In the future studies, to better understand the industry as a whole, more qualitative studies in the forms of interviews should be conducted to employees in different departments within a LED lighting company. If it is a company with traditional technology, people from those departments should also be interviewed to investigate the potential internal tension, the communication etc. In addition, through this research, it seems that the future trend of LED is going to be the “connected lighting” or digital lighting. More investigations should be done in the future by interviewing companies that have a specialisation in this area or companies that are trying to expand on this area.

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9. Conclusion

The LED lighting industry has expanded rapidly in size in very recent years but because of this rapid development, relative insights of the industry has also been missing. In this context, this particular research has provided up-to-date information about the industry by investigating the business development of the biggest player in the LED lighting field. From the research, it is obvious that the LED lighting will be the single dominating lighting technology in the coming future. Not only Philips, but also many other lighting companies face similar problems or challenges that Philips is facing in the transition process. On the other hand, LED technology brings many benefits to the society with its environmentally friendly features. It will be beneficial to massively apply the LED lighting technology as our daily lighting. Therefore, this research should only be a beginning of studies about this industry and more investigations should be conducted in the future to better understand the dynamics of this industry.

The LED lighting industry : a case study with Philips lighting