Philips to Focus on Health and Consumer Goods

Royal Philips Electronics (Amsterdam, The Netherland) plans to separate the lighting unit and focus instead on healthcare equipment and consumer goods.

Philips will attempt to exploit HealthTech opportunities by combining the existing Healthcare and Consumer Lifestyle businesses into a new division called HealthTech, which will control an annual EUR 15 billion in sales. The lighting operations division will become a standalone company with revenues of EUR 7 billion, and a new ownership structure will be considered. Both companies will continue to benefit from leveraging the Philips brand, but while sales in HealthTech will be dominated by imaging systems, sales in lighting operations will come from light sources and electronics.

The move intends to capitalize on the convergence of professional health care and consumer end-markets across the health continuum, from healthy living and prevention, to diagnosis, treatment, recovery, and home care. According to Philips, this is driven by a rising engagement of consumers to proactively monitor and manage their health, and increasing pressures on the healthcare system to create new models of care to deliver better and affordable care. The HealthTech businesses already hold leading positions in oral healthcare, healthcare informatics, ultrasound diagnostics, cardiac care and home healthcare.

The Lighting solutions business will also be better positioned to capitalize on the fundamental changes taking place in the industry, in which value is shifting from individual products to systems and services. As a stand-alone company, the Lighting solutions business will benefit from improved market access to boost growth in connected light emitting diode (LED) lighting systems and services, which will offsetting the decline of conventional lighting. The creation of the Lighting solutions company was preceded by the merger of Philips’ Lumileds (LED components) and automotive lighting businesses into a stand-alone lighting components company.

“Philips is uniquely positioned to help reshape and optimize population health management by leveraging big data and delivering care across the health continuum, from healthy living and prevention to diagnosis, minimally invasive treatment, recovery and home care,” said Frans van Houten, CEO of Philips. “The combination of our Healthcare and Consumer Lifestyle portfolios and the integration of the data from the connected products on Philips’ cloud-based digital health platform illustrate our opportunity to capture growth in an increasingly connected world, where societies are looking for more effective and lower cost health solutions.”

The decision to move lighting into a standalone company to drive growth is similar to a move by Siemens (Berlin, Germany), which spun off its entire lighting division in 2013 due to stiffening competition.

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