NEW YORK — By late 2014, LED lighting was closing in on 40% penetration of the global lighting market. It was the second consecutive boom year, confirming the breakthrough in the key regions of Europe, North America, and China. Driven by enhanced controllability and energy efficiency, the revolution will continue and momentum will build throughout 2015. This transformational change brings massive opportunities across value chains, but also presents huge strategic challenges to incumbent participants in terms of pace of technology change and business model. The growth will continue to 2020 and beyond, bringing a future that is totally different than the familiar traditional lighting markets.
Key Findings
- The global LED lighting market was worth $ million in 2014, having grown by % compared with 2013. It was the second consecutive boom year, confirming the breakthrough in the key regions of Europe, North America, and China.
- The main drivers for LED lighting came largely on the back of government decisions, such as bans of inefficient lighting by the European Union, the United States, and Canada, and the Chinese government’s decision to adopt LED ahead of its planned ban. It was further supported by initiatives such as the rebates offered by utilities in the United States.
- Government initiatives, however, will play a decreasing role over the forecast period. 2014 brought LED lighting mainstream—awareness is very high, and LED products are available widely and at different price levels.
- Pricing is key to further adoption, especially in applications less prone to total cost of ownership (TCO) calculations.
- In 2014, the largest applications for LED were residential, outdoor, architectural, and retail. Except for architectural, which pioneered LED lighting, the applications have been the winners of the 2013–14 boom.
- The fastest-growing applications in the 2014– period are expected to be industrial, office, and hospitality. Industrial in particular will grow from a low base, while adoption in the large office space will increase outside of the headquarters/representative buildings that were more of the architectural adopters.
- The flexibility of LED lighting will provide demand for controls, both in the form of LED drivers and lighting management systems, offering the full spectrum of personalization. The retail sector is increasingly relying on this product integration. Low penetration in the large residential sector is set to increase over the forecast period.
- Standardization is a key issue that will need to be solved over the forecast period. The success of Zhaga products might help with compatibility of products from different manufacturers. New legal requirements and stronger enforcement of laws and standards already in place are also expected in key regions. Lighting Europe, the industry association, periodically calls for more control on noncompliant LED imports from Asia.
- Penetration in large applications will require tailor-made solutions and new products. The level of research and development (R&D) required is very high, and it is expected that many lighting companies, especially in the fixture market, will not be able to fund this LED drive and will leave the market.
- At the same time, new small, local entrants focused on LED solutions and close to their target customer base will provide a new form of competition to the large, global participants.
- Philips Lighting, Osram, and GE Lighting are all determined to make the most of their LED know-how, and look at different ways to compensate the disappearance of their replacement bulbs market component. R&D and new product development have been limited to LED for years, and by the end of 2014 both Philips and Osram achieved % of their turnover through LED.