Transitional Year for the Global Lighting Market

17 February 2015

Last year was a challenging one for lighting products, with most traditional technology suppliers reporting declining quarterly revenues for lamps and luminaires. In contrast, many LED-only manufacturers have seen their revenues rise.

This trend is expected to continue, with lamp revenues expected to increase at a compound annual growth rate (CAGR) of 1.4 percent, from $28.6 billion in 2014 to $29.9 billion in 2019. Over the same time period, LED revenues are set to increase at a CAGR of 17.3 percent, while the CAGR for traditional technology declines by 7.6 percent.

Traditional technology lamp manufacturers have had to restructure their portfolios, as traditional lighting products are replaced by more lucrative LED lamp and luminaire products. At the same time, high growth rates for LED lamps are attracting lots of competition from low-priced Chinese manufacturers—margins have been squeezed and could continue to decrease. In fact some manufacturers could be forced to leave the market altogether if they cannot find a way to compete at lower price points.

Currently, A-type LED replacement lamps—which replace the traditional technology A-lamps that are especially prevalent in the residential sector—comprise the majority of LED lamp shipments and revenue in North America, Latin America and EMEA. An increasing number of manufacturers introduced T-type LED products last year, to address this large and growing market.

According to the most recent IHS findings, 10.6 billion fluorescent units are currently installed in indoor commercial and industrial applications worldwide, which accounts for about half of all lamps in this sector. However, LED penetration has yet to cross 1 percent.

In the past, there was little incentive for building owners to swap fluorescent tubes with T-type LEDs, as the high initial cost of the LED products and relatively small efficiency gains over fluorescent tubes meant a low return on investment. However, new and more efficient products are now entering the market, creating a large potential market for LED-integrated luminaires. Cree, for example, released a 150 lm/W LED troffer with a 100,000 hour lifetime last year, which could reduce energy consumption by 70 percent.

Technology advances have also led to products that provide a better colour rendering (CRI) and a more pleasant color temperature, which is important to retailers and other end users who require high-quality light. Lighting manufacturers have also begun embracing the Internet of things (IoT), producing smart light bulbs that can be controlled from a smartphone, play music or have integrated smoke detectors and security cameras. Introducing lighting products like these is one way manufacturers are differentiating themselves, in this increasingly crowded market.

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