Philips Lighting's CLBG Sets Sight On Asian Home Lighting Market

CEO believes Asians are the consum

Clearly showing ambitions to tap the Asian market for further growth, Philips Lighting's Consumer Luminaires Business Group (CLBG) officially launched its Ledino collection of LED (light emitting diode) lights for households at the autumn edition of the Hong Kong International Lighting Fair 2009.

Reinterpreting, with ample business savvy, what has been reported and said repeatedly of the huge potential in Asia, and likely China, Allard Bijlsma, CLBG's chief executive officer, said that “Asia is very important to us for it is our growth engine of the future. Asians are the consumers of the future because people there are very receptive to new technologies and concepts. That's why we are focusing on the region and have invested quite a lot in Asia in terms of personnel and organization.”

The CLBG doubled sales of consumer lighting in Asia in 2009 relative to that in 2008 and, Bijlsma said, the group expects to do even better in 2010 due to more opportunities available. About a third of the group's products are sold in Asia and regions outside Europe and North America, said the CEO.

“Rapid sales in Asia has helped to triple the size of our product portfolio in 2009 from 2008, which is likely to double in 2010,” he said.

Bijlsma promised that the group will expand presence across all Asian countries, from New Zealand to Australia, and from the Philippines to Malaysia by mid-2010, with China and India to be the main market with a combined population exceeding two billion. “We are present in all Asian countries except Japan, Pakistan and the Philippines,” he says.

With Philips being generally regarded as the upscale, ubiquitous brand in lighting worldwide, Bijlsma's confidence in the group's Asian program was wittily summed up: “Some people tell me after the sun Philips lights up the world the most.”

High Brand Exposure

Again confirming the global exposure of Philips, he said that 80 of 100 mainland Chinese consumers recognize the Philips brand, and more significantly 70 out of 100 prefer Philips over other brands.

Moving towards smoother market expansion in Asia, Philips Consumer Luminaires acquired in November 2006 the lighting maker Massive Lighting in Britain. Rowena Lee, Senior Marketing Director for Asia Commercial of Philips Lighting, said that Massive will supply Philips with a complete range of home lighting for the Asian market, especially China.

Bijlsma said that home lighting made up some 24% of the group's worldwide sales, which in 2008 reached around US$9 billion, with professional lighting accounting for 75%.

3 Main Trends

Revealing market trends, Bijlsma said that three main trends for consumer lighting are emerging: People are looking for lighting to enhance relaxation and ambiance, so having dimmable feature is important. Consumers also want quality lighting but as well as well-being, so security is also important. Efficiency and output are also important features, so suitability prevails functionality. Offering specifics, he said that the largest segment of consumer lighting consists of living room lighting, on which consumers spend about 66% of lighting budgets.

With energy efficiency being important, Philips Consumer Luminaires invests 4.3% of sales in R&D yearly on average to develop efficient lighting technologies, said Bijlsma. “Up to 98% of our product portfolio highlights this important feature, for lighting consumes as much as 19% of electricity worldwide. If we can reduce such consumption by 15% we can greatly reduce greenhouse gases,” he said.

Along the track to develop more energy-efficient lighting, Philips will build about half of its portfolio with LED lighting, featuring higher lumen-per-watt, by 2015. Although many non-LED lighting technologies compete against LED as the efficiency king, Bijlsma remains confident of LED: “Because we believe LEDs can achieve performance/price ratio of 50% by 2015.”

LED as Foundation

Pointing to the Ledino collection as example, Bijlsma said LED-integrated lighting will be the foundation of future consumer lighting, upon which Philips plans to build. This trend suggests the lighting business is evolving upmarket and towards more sophistication, moving from being mere utilitarian to one that involves more fashionable considerations, added value and consumer-aspiration, he stressed.

The Ledino Collection is priced from 60 euro for budget consumers to 500 euro for upscale consumers. Illuminating Philips' LED-technology strategy sort to speak, Bijlsma said that “switch point” prioritizes proper lumen-per-watt, efficiency and light output before pricing. Not to confuse laymen with technicalities, he said simply that Philips believes when its technology reaches these critical points, people will be fully satisfied with LED technology to drive down prices.

Bijlsma said that price is only an issue for low-end manufacturers who cannot satisfy consumers with adequate technologies, without specifying that only bottom-end producers try to undersell to win. Claiming that many LEDs still cannot measure up to Ledinos, he said that people believe paying for advanced technology makes practical sense. “We believe Philips can reduce cost as soon as optimal price-to-performance ratios are achieved,” he said, adding the average price will drop at double digit rate per year as did in the semiconductor industry. “We know LED technology is more efficient as shown in the price reductions. So as technology continues to advance, so will price,” he continued.

AC LED is the Future

Alternating current (AC) LED is a good technology that Bijlsma said Philips considers as the product of the future: “We believe AC LEDs have the advantages of durability and energy efficiency, and allows for freedom of design. So we will definitely further develop AC LEDs as part of our product range to push the boundaries of such product.”

However, AC LEDs remain, due to being a latecomer technologically, pricier than its DC counterpart, which Bijlsma attributes to low production volume. Citing the well-worn economy-of-scale business theory: “Costs come down when one reaches a certain production volume,” he said, adding that ultimately people will willingly pay for AC LEDs for its inherent characteristics allowing for greater design freedom and more product variations, as well as longer life than DC. “In the long-run, price of AC LEDs will depend on the market position of LEDs. I believe the price should not be set too high, but such is not the decisive issue,” he said.

Philips Consumer Luminaires adopts the multi-distributor, or the shotgun approach, strategy to maximize product availability, selling at traditional, brand, professional stores, and do-it-yourself stores. But such diversification strategy has yet to reach the Ledino Collection, which are still sold through professional and Philips-owned stores. Likely due to higher prices, he said that not everybody will want to buy Ledinos, except for interior decorators and installers who are working on larger projects as for corporate customers and builders. However, he added that Philips will likely develop consumer-priced Ledinos targeting traditional retailers and budget-conscious buyers in three years or so. (Feb.10)