Philips decision to sell Lumileds to Chinese financial group Go Scale Capital has taken a sharp turn. The business deal was abruptly halted by the Committee on Foreign Investment in the United States (CFIUS), due to unknown concerns. Philips and Go Scale Capital has been forced to call off the deal, which has sent shockwaves throughout the market and caused new changes in manufacturers’ competition race.
The U.S. government halted Go Scale Capital’s acquisition of 80% of Lumileds shares. The investment team would have had the opportunity to integrate Lumileds strength in LED chips, automotive LEDs, and lighting applications. By applying the investments and deploying it in green industries, it could have created greater market value, but all these have been disrupted by CFIUS decision. Following these turn of events, Lumileds might be sold to other manufacturers or investment consortiums in the future. There is also the possibility that it might acquire other LED related manufacturers, and be resold at a better price.
CFIUS action could also end business deals between other U.S. technology companies and potential Chinese buyers, analyzed LEDinside. Other U.S. LED manufacturers that are in talks with Chinese investors or Chinese companies proposed share bids could all be terminated. U.S. LED companies considering to allow Chinese investors to purchase shares, or sell out factories or technologies, might consider abandoning negotiations, due to potential objections and disapproval raised by CFIUS.
For LED manufacturers based outside of China, the impact from Lumileds terminated sales and the blockade of Chinese companies from investing in U.S. can also create different impacts.
Lumileds might be sold to other international buyers. Earlier market rumors pointed a Korean LED company might invest in Lumileds to acquire automotive lighting and key LED patents. A Taiwanese LED manufacturer might also consider absorbing Lumileds to expand its international markets. Companies will be left with the option of investing or withdrawing investments.
CFIUS decision might also represent a part of the U.S. government policy, which is protecting key technologies and products related to national security. It could also signal companies selling or exporting advanced technologies to a foreign buyer need to be more careful of CFIUS review process.
U.S. technology or LED companies that have successfully opened up to foreign investors, or transferred related technology, are not exempt from national security issues. In these cases CFIUS probably analyzed these transactions are acceptable, and the U.S. government arm’s review standards will be under the industry close scrutiny in the future.
In the next few months, German manufacturer Osram will be carving out its lighting business into LEDVance. The company’s technology has little relation to national security, but its value and brand market distribution experience is very attractive to Asian manufacturers. The industry will be paying close attention to its future development.