Osram to Supplement R&D With Takeovers to Keep Pace With Demand

Osram, the lighting maker to be spun out of Siemens AG (SIE), plans to make acquisitions to supplement research spending as a move toward LED marks the fastest change in the industry for three decades, chief Wolfgang Dehen said.

“The lighting business will see dramatic changes like we’ve not seen in the past 30 years,” said Dehen at a press conference in Munich today. “If you look at what we did in the past, that’s going to be a good indicator going forward.”

Osram, expected to list shares in Germany in the fall, is prepared for being outside the Munich-based German engineering giant, Dehen said. The company, which holds the No. 2 spot in the $65 billion industry behind Royal Philips Electronics NV, earlier this year agreed to buy Siteco Lighting, strengthening its position in the market for fixtures.

Governments are discouraging the use of conventional light bulbs, which convert only 5 percent to 10 percent of the energy used into light and have shorter lifespans than LEDs. To help reach its target of reducing carbon dioxide emissions 20 percent by 2020 from 1990 levels, the European Union is phasing out conventional clear incandescent bulbs of 100 watts or more.

By next year, models such as frosted bulbs and high-energy halogen lights will also be erased.

Munich-based Osram spent 5.5 percent of sales on R&D last year and aims to maintain it at a high level, Dehen said. It supplies Ford Motor Co. (F) with an LED system for its Mustang sports car, and headlights for the flagship A8 model of Volkswagen AG (VOW)’s Audi. It is developing LEDs that allow mobile phones to project pictures or movies onto a wall and generates more than 20 percent of sales from LEDs.

Philips, which spent 6.2 percent of sales on R&D last year, bought four lighting businesses last year.

The overall lighting market is likely to grow 44 percent to about 65 billion euros by 2016, according to Siemens.

“It’s a fast-growing market, you need to invest,” said Dehen, who aims to get Osram included in Germany’s benchmark DAX index.

To contact the reporters on this story: Richard Weiss in Frankfurt at rweiss5@bloomberg.net

To contact the editor responsible for this story: Benedikt Kammel at bkammel@bloomberg.net.

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