Why Philips Lighting Closed the Factory in Shenzhen?

Why Philips Lighting Closed the Factory in Shenzhen?

On May 31st, Philips Lighting Factory in Shenzhen–Philips Consumer Luminaires
Manufacturing (Shenzhen) Co., Ltd. issued announcement,about decided to dissolve
the company in advance, caused uproar in the industry.As the world’s leading lighting
brand–Philips Lighting, much attention has been paid to each step of the closure of the factory in shenzhen, this has also sparked concern about China’s manufacturing

In fact, the review of Philips Lighting movements can be found in recent years, Philips
Lighting have shut down many factories all over the world, including the United States, Canada, Britain and so on, and also announced it will close a factory in Thailand this year.


What is the reason behind closing factories frequently? It is not hard to know, this is
clearly facing the intense market competition, profit margins decline, adjust to make
strategy according to market demand, this is a common phenomenon in the development  of enterprise transformation.

As for the cause of closing Philips Lighting factory in Shenzhen, From the announcement  of dissolution, the factory has experienced sustained economic
downward in recent years. Rising costs, business is deteriorating, and many other
difficulties, although the company has taken various measures, still failed to reverse
the situation. In view of this, the company shareholders and the board had decided to
dissolve the factory in advance.

According to the reporter, Philips Consumer Luminaires Manufacturing (Shenzhen)
Co., Ltd. is an assembly factory of Residential lighting, mainly processing and
manufacturing decorative lightings.

Formerly known as “Massive” by Belgium joint venture with Hong Kong famous “YuWei group”, formerly known as WMSDS lighting co., LTD., after many years of production scale expansion, now running at more than 60 assembly lines, and have modern automatic coating equipment and assembly workshops, workshop area is more than 60000 square meters.

In 2008,Philips Lighting was acquisition 52% stock rights of WMSDS company.And in
October 2009, “Philips Consumer Luminaires Manufacturing (Shenzhen) Co., Ltd.” was registered.

In December 2010, Philips Lighting purchase the remaining 48% of  WMSDS company. At this point, Philips became Philips Consumer Luminaires Manufacturing(Shenzhen) Co., Ltd. 100% stock rights holders.

For these reasons, Philips Lighting says the behavior is in response to Residential
Lighting market, change to smart Internet development needs and strengthen the
competitive power of the industry, is part of the implementation strategy of the
company, it is not just the surface of the cost considerations.

Philips Lighting in the history of 125 years of development constantly leading the
development of the industry, whether it is leading the traditional light source to the
LED conversion, or LED lighting to the smart Internet conversion, Philips has always
been the industry leader.

philips lighting

Industry insiders said to reporter, Philips’ advantage is in light source, compared with
Chinese local brands in lighting, there is no strong competitiveness, in the case of
enterprises operating costs increase in Shenzhen, closing factories, focus to smart area is wise.

In fact, as early as in 2014, Philips has put forward the concept of “smart + connected
lighting”. The CEO Eric Rondolat of Philips Lighting also said: “the future of the lighting must be smart + connected.”

As you can see, Philips Lighting at the 2016 Frankfurt international lighting fair, all
items is about smart + connected, including Philips ActiveSite smart+connected, Philips Lighting system PCK, Hue White Ambiance and so on, shows the world’s leading smart+connected LED lighting technology, smart lighting products and solutions, covering home, office, commercial, cities and other fields, to create more value out of the lighting.

Compared to the transformation in the field of smart+connected, Philips Lighting in the capital market get more industry attention.Since last year after Philips wanna sell
Philips Lighting business, has been looking for the right buyers, many factors of
interference, Philips finally chose to independent public the lighting business.

On May 27, 2016, Philips spin-off of Philips Lighting in Amsterdam in the Netherlands
is listed on stock exchange. After listed,Philips Lighting value of 3 billion euros, even
debt calculation is 4.5 billion euro, become the world’s largest independent lighting
manufacturers. According to relevant data show that in 2015, Philips Lighting
equipment business revenue was 7.5 billion euros, operating profit was 331 million
euros, in the global LED lighting market is occupied more than half of the revenue.


However,On May 27 Philips Lighting listed, On May 31st factory of shenzhen
announced the closure , is this a coincidence or a necessity? Even though the Philips
Lighting said that not associated to reporter. But,the relevant industry investors think,
Philips closed factory in shenzhen, is the capital market investors demand for
performance and profits, independent public the lighting, management needs to
improve asset profitability. A factory dissolved cost will not very high, fixed assets have flange, especially factory land of Shenzhen is premium and high returns, the income of the capital market, is the value in the board.

With the maturity of LED technology, Philips Lighting is starting from “selling
products” to “selling services” , actively adapt to the development of the new lighting
industry, constantly adjust development strategy, transformed into a provide high
value-added services.

Whether it be split, closing factories “subtraction” strategy, or into capital “additive”
strategy, it’s all lighting industry development inevitable trend. Philips is one of the
international giant lighting industry, but also need to take advantage of an opportunity
for its development, adapt to the change of the lighting industry, maintain sustained,
lead is the eternal challenge lighting enterprise.

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