For Philips, LED is the way to go

Last month, Philips announced its entry into LED (light emitting diodes)-based solar-powered lighting solutions. Developed by its R&D facility in Noida, the initiative was a part of the Dutch firm’s move to offer customers simplified solutions.

Philips, the market leader in lighting products, also showed a sneak preview of a portable solar-powered LED rechargeable light. The product, currently under development, would hit the market soon.

Just why is Philips going so aggressive on LED, which is much more expensive than tubelights and compact fluorescent lamps (CFL) that are in vogue now? Nirupam Sahay, senior director – marketing, Philips Lighting, has an explanation: “The demand now is more for tubelights, CFLs and LEDs — in that order. But in 10 years, it will be just the opposite”. He adds that “more than two-thirds of Philips’ marketing money is going for CFLs and LEDs.”

 

Philips expects 75 per cent of its sales globally (since it does not give out region-specific figures) to be in LEDs by the end of the decade.

To achieve that, the company is aggressively moving on its retail initiative to stay ahead of the curve.

“International players like Osram and GE are not really present in this market. The number two to six are all Indian players and the rest, unorganised,” says Sahay. He adds since consumer demand is there, “rapid growth in retail presence in metros, mini metros and Tier-I cities will be the company’s strategy for the next few years”.

Philips has already opened the country’s first branded lighting lounges – each over 1,500 sqft and total 42 in number – and 400-odd Philips Light Shoppes, basically shop-in-shops, across the country in the last two years and want to ramp it up quickly. “We will double the number of these retail outlets by the end of 2011,” says Sahay.

According to him, Philips Lighting has cornered a double-digit market share, growing at nearly 20 per cent (as in 2010) and the objective is to sustain it.

The Dutch major also wants to move away from selling just boxes, to selling solutions in the retail space. “Two years old in the home decorative lighting space, Philips wants to extend its leadership in brand equity to go beyond selling lamps, to creating ambience for every room of a family,” says Sahay. It has brought out an LED-based product for children’s room called Ledino.

Though CFLs have gained large acceptance in the domestic market – the segment is growing at 20-25 per cent for the last two-three years – LEDs are growing in double-triple digits even though they are comparatively high-priced at Rs 600 and beyond.

Sahay, however, says a customer can recover his costs within a year as LED has a life of over 15 years. In October 2010, Philips introduced the 5 Watt retro-fit LED lamp in the consumer segment and plans to launch the 7W and 9W lamps by the end of this year.

Sahay is optimistic that the prices of LEDs will come down over a period. “We have already adapted our LED global technology to our local needs at our development centre in Noida, which has brought down the price significantly. But it is expected to come down further.”

In Budget 2011, basic customs duty on inputs used in manufacture of solar modules and cells has been waived off, excise duty on LED bulbs has been halved to five per cent, while special countervailing duty of four per cent has been fully exempted.

The lighting business in India, which has largely remained an unbranded market with mostly Chinese fittings and fixtures overshadowing the obscure branded ones, is changing fast. Big brands are scurrying for a pie of the Rs 7,500-crore-plus (in 2009) market, which is growing at nearly 17-18 per cent for the last few years .