Philips in $2.8bn lighting components deal
Philips is to sell 80% of its holding in its lighting components business for $2.8bn (£1.89bn).
It is selling the stake to Go Scale Capital, a technology fund which plans to sell more car lighting systems and LED lamps.
Philips will focus on consumer goods and medical technology.
Lumileds, as the new business will be known, will have 8,300 employees worldwide and had sales in 2014 of more than €2bn (£1.45bn).
"We expect to see significant growth and unparalleled inroads into new opportunities such as electric vehicles," said Go Scale chairman Sonny Wu.
ABN Amro analyst Marc Hesselink said the sale price was "considerably above market expectations".
The sale is being seen as the beginning of Philips' break from the lighting industry. It has been making light bulbs since the 1890s.
Philips said in September last year that it planned to split itself in two, separating its lighting business from its healthcare division.
It said at the time that both companies would continue to be based in the Netherlands and use the Philips name.
It also said it would consider "various options for alternative ownership structures'' for the lighting arm, meaning it could potentially be sold or listed separately on the stock market.
Philips has been streamlining its business by selling off underperforming parts of the business in recent years.
The move by Philips follows the sale by rival Siemens of their Osram lighting business in 2013.