With consumer sector weakness hammering overall profits, Signify today said it and its Chinese manufacturing company Klite — which it now calls a “joint venture” — will open the duo’s largest factory in the world, aiming to add “speed, efficiency, and innovation” to their residential efforts.
Zhejiang Klite Lighting Holdings Co., Ltd. (Klite) will start fully operating 192 production lines in the new 200,000-square-meter (2.15 million square feet) facility in Jiujiang by the end of the year, Signify said. Jiujiang is situated about 370 miles inland with a major port along the Yangtze River, about 150 miles southeast of Wuhan, in Jiangxi Province. Recessed Inground Light Manufacturers
Klite makes LED lamps and luminaires for other vendors including Philips-branded goods for Signify. Signify agreed to buy 51% of it in July 2019, and closed the acquisition about two months later. The idea was to gain greater control of supply, and to sell the Chinese-made goods mostly outside of China.
At the time, Signify said Klite would continue to operate as a standalone entity. In today’s announcement, it referred to Klite as “Signify’s joint venture company.” Joint ventures are often 50/50 in ownership. LEDs Magazine has asked Signify whether the “JV” phrasing reflects any change in the relationship. We had not heard back in time for this article.
Whatever the status, Klite has not performed well financially for Signify of late. In the company’s recent second-quarter financial results call with analysts, CEO Eric Rondolat identified “top line weakness in our Chinese Klite business” as one of three factors that dragged profits way down in Signify’s consumer division, which is called Digital Products. While Signify’s professionally oriented Digital Solutions business and its Conventional Products group both managed to increase profits as sales fell, income crashed in Digital Products, leading to an 82% drop-off in corporate profits to €45 million from €248 million a year ago.
Other factors that dragged down the consumer business included a sales decrease for Hue connected products and a weak OEM business. Signify has already tipped plans to buoy the Hue business.
The opening of the new Klite plant is a much bigger measure also aimed at boosting the performance of Digital Products. Although Klite makes products both for the professional and consumer segments, Signify focused its attention today on the consumer aspect.
“Opening this state-of-the-art facility not only strengthens our in-house manufacturing capability for LED lighting products, but it also helps us drive even greater speed, efficiency, and innovation so we can better prepare for the growth in the global LED lighting market,” said Rowena Lee, division leader, Digital Products, at Signify.
“Further growth in China is a key component of our global business strategy,” said CEO Rondolat. “This new factory is an important addition to our global production capacity, supporting Signify’s growth in China and across the world. Fully in line with our growth vision, the plant illustrates our long-term commitment to China, and enhances our manufacturing and innovation presence in this important market to support China’s sustainability goals.”
LEDs has asked Signify how much it is spending on the new factory, and how the amount is split with Klite. We are waiting for a reply.
Signify said that the Jiujiang site “will utilize world-class manufacturing technology, advanced process control, and intelligent logistics to produce LED lighting sources and luminaires for both professional and consumer markets.” It also hailed “smart factory” and sustainability aspects including energy efficiency measures.
“The new factory will be our largest manufacturing site for LED lamps and luminaires in China and worldwide,” said Yanwei Shen, CEO of Klite. “Jiangxi Province is at the hub of China’s Midwest region with advantages in transportation and labor resources, making it a great location to build a manufacturing base of LED lighting.”
Klite’s headquarters are in coastal Haining, about 80 miles southwest of Shanghai in Zhejiang province.
Signify did not say whether the new plant will come at the expense of closing other factories. LEDs is awaiting an answer. At the time of the July 2019 original Klite announcement, Signify had 9 conventional lamp factories and 40 luminaire and driver factories in operation.
In today’s announcement, the company said it has 9 manufacturing facilities in addition to the new one. The company has been laying off staff. In the second quarter it reduced full time employees from 35,407 to 33,381 with many of the job losses coming from factories. On the second-quarter call in late July, Rondolat also said the company would be making “structural changes.”
MARK HALPER is a contributing editor for LEDs Magazine, and an energy, technology, and business journalist (markhalper@aol.com).
Led Flood Light Supplier Follow our LinkedIn page for our latest news updates, contributed articles, and commentary, and our Facebook page for events announcements and more. You can also find us on Twitter.