While Siemens will not yet publicly comment on plans to spin off its Osram lighting business as an IPO, sources close to the deal told Bloomberg that company execs are meeting on March 28 to iron out details. At least one investment analyst believes Siemens wants out of the lighting market because lamps will become more commoditized in the future. In a Bloomberg report this morning, James Stettler, an analyst at UniCredit in London, is quoted as saying, “The lighting industry faces huge changes… China is subsidizing local manufacturers and the business will eventually be commoditized. It makes sense to exit Osram to avoid getting out too late.”
While there's no denying the impact that LEDs will eventually have on the lighting market, I think the concept of a complete commodization of the business is a bit premature. Yes, LEDs are basically computer chips that light up. Engineers are teaching them to do an extraordinarily good job of doing that. And manufacturing them is a high-volume, low-profit business dominated by Pacific Rim players.
But the real-world reality is that for all of the wonders of LEDs, right now the best T5/T8 fluorescent lighting systems and best-of-breed CFLs, halogen, and HID lighting still produce a ROI that LEDs can't match.
Zillions of square feet of office space, factories and homes are being lit quite efficiently by these conventional systems, thousands of salespeople are still out selling them like mad, and distributors still stock billions of dollars of the stuff in inventory. That all won't go away anytime real soon. You can't stick your head in the sand and say LEDs won't change the lighting biz, but you shouldn't get dazed by the glare of all the publicity and excitement surrounding them, either.