Hindsight is a wonderful thing, but this deal shouldn't come as a huge surprise; successful, innovative, technology-rich LED lighting specialist attracts the attention of lighting giant with self-professed commitment to solid-state lighting as the future of the lighting industry. A bit of handholding ensues, possibly some flirtation with other potential suitors, then the marriage is announced. And no more squabbling about who gets to light the Empire State Building.
The deal makes a lot of sense on many levels for both sides, much like last year's announcement of cooperation between GE and Nichia. Speaking of which, we can speculate that GE and probably Osram as well would have had a strong interest in acquiring CK. Was there a bidding war that pushed the price offered by Philips up to $34 per share? As I said, this is just speculation.
Among many benefits of the deal, Philips gains an established US-based LED fixture supplier. Philips' own North American Solid State Lighting Luminaires business will be "merged" with Philips CK in Burlington, MA (LEDs Magazine has decided that Philips CK is a lot easier to type than the official name of Philips Solid-State Lighting Solutions.) The Philips group in New Jersey has been around for less than 2 years and has made some progress in architectural and other lighting markets. But these projects have not used Philips LED luminaires, and instead the company has partnered with smaller suppliers and integrators such as LED Effects (see News).
One issue, said Philips, was the time taken to redesign "European" luminaires for the North American market and gain the necessary UL listing. Another issue, in the view of external observers, was patents – there is a widely-held (but unsubstantiated) belief that CK's strong patent portfolio prevented Philips from launching color-changing LED luminaires into the US market. Some industry participants looked forward to the day when Philips would challenge CK head-on, possibly in court. Now the goalposts have been shifted, and the patent dispute between CK and TIR Systems (now also part of Philips) will also quietly disappear. The outcome of this case would have been extremely interesting, since we all wanted to know what the real deal is with CK's core patents (Prior art or not? Obvious or not?). Backed by Philips, the CK portfolio takes on a whole new dimension, and there won't be any more lawsuits. There might, however, be a lot more licensees.
However, this should be viewed as a positive for the solid-state lighting industry, since it removes a degree of uncertainty and allows the industry to move forward. Competitors will view Philips with even more trepidation, since the company is now firmly positioned as a core part of the SSL industry. Philips' existing SSL activities joined with CK and TIR make a powerful combination, not forgetting of course that Philips owns Lumileds, the largest power LED manufacturer*.
Even so, the SSL industry is at an early stage in its development, and there are plenty of opportunities for a multitude of players to compete in a wide range of different applications. The general illumination market is still wide open, and Philips will have to continue to work hard to become the major player in this area – even with CK on board.
* Although Lumileds and CK will now be part of Philips, don't expect CK to start using Lumileds devices exclusively; CK works closely with Cree and Osram and was also using Nichia LEDs in some of its products shown at Lightfair, and this situation will undoubtedly continue. And speaking of Cree; as of the end of March this year Cree held about 4% of shares in Color Kinetics.
