Gasgoo CEO talked with Steve Barlow, CEO of the global lighting solutions provider Lumileds.

Thank you, Tina. It's great meeting you.

Sure. So Lumileds really operates as one of the market leaders in four different businesses. We have a business for the automotive aftermarket where we generally use the Philips brand. These are things like replacement lamps for vehicles as well as LED retrofit replacements, and we also have a broad array of accessories in that business. Our second business is the general illumination marketplace — the lighting in this room, your office space, outdoor street lighting, just about any type of lighting application you can think of. We make everything from mid-power to high-power LEDs in all colors. Think about some of the beautiful architecture here in Shanghai, the buildings lit up in various colors — that's a big part of the business we serve. Then we also have a product area called specialty lighting, which is generally for things like your mobile phone camera flash function. So if you have a torch on your mobile phone, there's a reasonable chance it's coming from Lumileds. And then the fourth business, which is extremely important for us and our largest business, is the automotive OEM space where we're supplying LEDs to basically every function on the exterior of the vehicle — the tail light function, the daytime running lamp function, high beam, low beam, turn signal, every function on the outside of the vehicle.

So for a long time the trend has been about getting more light out of the LED and making that LED as efficient as possible. And that will continue, although that's starting to slow down as the investments in R&D are becoming less and less — in other words, you have to spend more in order to get that incremental difference. So now what we see happening are new trends: the digitization of lighting, smart lighting. It's happening in the illumination space and it's definitely happening in automobile applications. So today you can already see on the road more and more sophisticated headlamp functions, with adaptive driving beam in particular becoming very much a new and important trend, as well as styling. So when I go around to automotive shows, you will hear and see presentations about how light is becoming the new chrome for vehicles. For example, if you look at the new electric vehicles where the front of the vehicle no longer needs to be an open grill for a radiator, that becomes a pallet for automotive designers to put their designs and their signature on. So these are some of the trends that are happening real time. And then going forward, what we're going to see is much more communication coming from the lighting on the vehicle. So imagine you or I are on a street corner and we're looking to walk across the street. There's an autonomous vehicle sitting there. We can't see the driver. So we don't know if it's safe. But if the car is giving us a signal — either projecting something on the road or some type of display telling us it's safe — then we can walk across. So that's also starting to come. And I actually think in China it's going to be one of the earliest adopters of this signal projection type of technology.

Yeah, so as you just mentioned, the integration is definitely happening more and more. For example, there are sensors on vehicles — I mentioned ADB, adaptive driving beam, a minute ago. What will happen in the very near future is you will have sensors as you're driving be able to detect something and then illuminate that object. So for example, it might be late at night, dark road, there could be an animal off to the side of the road. The sensor will detect it and will illuminate it. So that just helps increase the safety of the situation and the awareness of the driver. So more and more that sensing technology with the lighting technology will continue to be integrated. Also as the resolution of the headlamps becomes greater and greater, it's going to be really important that you have the electronic capability to control that. So today people are launching systems that have maybe 10 or 100 pixels. In the future that's going to go up to tens of thousands of pixels. And so that's not going to be possible without the electronics behind it to drive it.

I think two things. On the challenge side, it requires a lot of education. So Lumileds invests quite a bit in developing the applications support in order to educate our customers on how to adopt these more sophisticated products, which require a bit more engineering in order to implement. That's something we continue to do. We've done that in the past — we were one of the very first companies to help customers implement LEDs into vehicles. Now, the opportunities that come with that mean more LED content on vehicles. And so obviously as a company looking to grow, that's a great opportunity if we can capture more and more of that content. The average vehicle two years from now will have a higher content of exterior lighting than we have today. Maybe one other challenge is some of these technologies I'm mentioning can be achieved today, but they're not always regulated everywhere. So that's another challenge and opportunity in that getting the different standards bodies to agree and accept and regulate these different technologies still has to happen in order for them to be deployed on vehicles. And different parts of the world are going to go at different paces. So in the US, for example, we only just very recently legalized the ability to make adaptive driving beam headlamps, where in Europe it already exists. Different pace in different regions. And as one of the key leading suppliers, we play a role in also that process — helping to educate and get approved these new standards. Similarly for the signal projection onto roads. Today there's not necessarily accepted standards for that, but we know in the future that will happen. Today it's primarily about personalization. So if you buy a new vehicle and open the door, maybe you see a beautiful logo, 'Welcome inside' or something like that — that's something people can do on their own today. But what we were talking about a minute ago in terms of having standards for communication — if you're riding a bike or crossing a road, what is the signal that tells you it's safe — that still all has to come. And a lot of people are working on that, including Lumileds.

Well, innovation is one of our core values. So we really take pride in being able to make the never-before-possible possible. Some really interesting examples of innovation that we've done are things like taking our phosphor conversion technologies and implementing them to do things you couldn't previously do. So as an example, we're able to produce an LED that when shined through a red lens produces white light for the backup function. That's based on our innovation capability. We're proud of often times being the first company to introduce new products into the automotive market. An example there might be a bi-color LED where you might have amber and white in the same package so that the customer can put that into a very small form factor that gets the styling look they're appreciating. And then again, while it's getting more difficult, we will continue to innovate in order to squeeze more and more light out of the semiconductor area and have that light be as bright as possible, which takes advantage of the trend of people wanting to have very thin, small headlamps that almost kind of disappear into the vehicle when they're not lit. So these are all areas where we continue to innovate and lead the market.

We have, in my opinion, an outstanding sales force and technical support applications teams that interface with customers on a very regular basis. We probably do more than any of our competitors in terms of educating the customer base. We do something called Technology Days where we're very active in getting engineers to come and see what is possible, and we provide in those Technology Days information about the reference design for the end application. And it's a strength of ours, and I think in many cases the customers actually look at us as an extension of their own R&D. That will help your customer success. That will help their success and hopefully ours as well.

Well, first of all, being an LED company, we're kind of green by design. Lumileds has saved a tremendous amount of energy just by having our products be adopted not just in vehicles but in all kinds of applications. So we're very proud of our sustainability track record. And we will continue to do that through, again, broadening the application of LED technologies. The way that we see it is, in the future there'll really be two sources of light: the sun and LED. And that saves a tremendous amount of energy.

Well, China moves very fast. You asked the question about standards a bit ago. What we see is China tends to move very quickly in adopting new technologies. We've been talking a lot about automotive OEM applications, but even in the automotive aftermarket, the LED retrofit lamps which we produce today — the adoption rate is happening probably faster in China than any other place in the world. Also, we're seeing with the electric vehicles how rapidly new brands are producing these vehicles and bringing these products to market. And so from my history working in automotive, it's been amazing and impressive to see how China came from in the past a number of joint venture situations to today many organically developed businesses. They're flourishing clearly and there's no question China will continue to innovate in this space.

We do. Maybe talk about LED retrofit again. So one of the downsides to the fast adoption of LED retrofit is not everybody is using Lumileds products, and in some cases the products being used are creating glare and actually making the situation unsafe. So we'll work with the Chinese authorities in order to set standards such that when you put an LED retrofit product into your vehicle, the lighting is safe for people. So we will have specific products designed and developed for the China-based market in order to support bringing up this social standard to a high level and create awareness and that type of thing. Also, in our accessories business, using again the Philips brand, there are products that we source, design, and produce locally in China for only the China market. For example, in-car refrigeration products and things like that. That's part of the localization. And we do manufacture a significant amount of products in China today. So in addition to sourcing accessories products, we build LED retrofit products here, we build traditional lamp products here, and we also build integrated assemblies like our Lumileds GO product which is used for high beam and low beam applications in headlamps. And we also have LED packaging happening in China. So we have quite a large infrastructure actually here.

Well, you're sitting in one of our R&D centers, right? This location here we have quite a bit of development expertise in addition to applications support. So the engineering capability we have is already quite deep in China. And we continue to look at which products make sense for us to not only develop here but also produce here. So yes, we've had for decades now investments happening in China, and that will continue going forward.

Oh, for us it's a huge and important part of our overall revenue. So we tend to be very strong in terms of our market percentage leadership in China, and as a result it plays a very significant role. I'm hoping that the China economy is going to continue to recover and rebound from the challenges in the past couple of years where we've seen semiconductor shortages impact supply chains, we've seen COVID restrictions obviously impact the overall level of business. To see this, especially the second half of this year, start to improve.

We had a board meeting earlier today where we reviewed that number and hopefully that's going to happen.

Absolutely not. No, we have really struggled in one key area, and that has been we've been forecasting for recovery and higher demand based on our customers doing the same. And we now have multiple quarters where we don't see the actual demand at the level that people have been anticipating. So that's not good because we end up building to that forecast and then we end up not being able to sell everything that we build. So I'm not satisfied from that perspective. I am satisfied with the level of new business development that we've been able to achieve. So in other words, getting our product design into future platforms — Lumileds is in a very good position there. But I think at the end of the day it's really going to come down to how that consumer confidence index rises and how people start to purchase new vehicles, accessories, upgrades like the LED retrofit. That's going to really drive the business for us in the future.

So for this year in some of our markets we're actually just looking to return back to levels of 2021 for the most part. But in the past we've achieved high single-digit growth in China, and that should very much be the case for us again over the next 3 years.

Yeah, well, first of all, I want to thank my team members for how diligently they worked over the last few years. Lumileds was one of the companies that set an example for how to maintain its production during the early COVID period. And in fact, the government used many of the procedures that were put in place in our Suzhou factory to help other companies actually operate during that difficult time. So I'm really proud of the team here. There were examples where the team was basically living in this office for a period of time because of the shutdown implications of COVID. So that dedication is something pretty special. It's something I'm extremely proud of. And then for the customers, it's just terrific to be able to come back and see them face-to-face. I had dinner with a customer last night where previously all of our meetings were just virtual, you know, over the computer screen. And it's so much nicer to be able to be there in person with the customer. So I'm excited to have the opportunity to come back. We'll see more and more of the Lumileds leadership team visiting customers, visiting our sites, and also visiting our suppliers in China, who are also extremely important to us.

Yeah, thank you very much. Thank you.