LED luminaires have proven without a doubt that they are no longer just hype. In fact, they are showing attractive market promise. This year, LED luminaires made up a third of the 59.5 billion dollar market for general lighting. Considering only two years ago LED lighting had less than 1% market penetration, this is an amazing accomplishment.
There are many factors which have played a role in changing the lighting landscape, but regulatory statutes make up a major part. With regulations such as EISA 2007, inefficient technologies such as incandescent lighting will be phased out or banned in many regions, causing their expected market share to decrease. California’s Title 24 building energy efficiency code will likely make smart controls the standard in lighting, which will drive the adoption of LED luminaires in new projects.
In the recent past, compact fluorescent lamps (CFLs) were the disruptive new technology in the market. It was expected that the great energy savings of CFLs would capture the market’s attention, but it took 20s years before they achieved appreciable market value. When introduced, CFLs were disappointing in color, quality and ease of use. The US Department of Energy (DOE) has gone to great lengths to avoid a repetition of history with the LED. The DOEs initiatives on Solid State Technology, caliper testing, and the L Prize competition have helped set high standards in the continued development of solid state lighting.
Besides the aid of regulation, LEDs manage to be successful on their own merit, due to their longevity and energy efficiency. They are ideal for directional applications such as down lights and they offer an operating lifetime of more than 50,000 hours. This has made LED lighting an attractive option for public municipalities, cities and utilities looking to reduce energy and maintenance costs. According to LEDs Magazine, their interviews with end users have shown that these lighting designers, architects and engineers are becoming more comfortable specifying LED luminaires for new commercial construction and large renovation/retrofit projects.
LEDs Magazine shows the revenue breakdown by region, with North America, Western Europe, and China contributing to the majority of the shipments. In China, the demand for LED lighting is such that manufacturers that once produced solely traditional lighting are being forced to produce LED luminaires or face the alternative options of consolidation or shut down. North America generally has high quality lighting requirements with low average selling price (ASP) preference, but customers may shy away if introduced to low-quality products. As for Western Europe, with strict energy conservation targets described in their 20/20/20 climate change initiative and current high energy costs, the region is expected to favor adoption of LED technologies even with high price points.
Strategies Unlimited forecasts LED luminaires will experience an average annual growth of 11% from 2014 through 2022. There are no anticipated price declines or energy-efficiency improvements in existing technologies such as halogen, incandescent, fluorescent, and HID luminaires. Unsurprisingly, these markets are expected to face steady declines during the forecast period, with high-intensity discharge (HID) and incandescent luminaires declining the fastest at 14% and 10%, respectively. However, LED luminaires are expected to increase in efficiency over time, while the cost of materials such as the thermal management components, optics, and LED packages will decline over time. As the ASP of LED luminaires shrinks, its penetration in the market will grow.
Market penetration of LEDs will vary based on form factors but also based on application. For example, lighting engineers and designers are more likely to specify LED luminaires for retail and hospitality projects than for residential lighting applications. The latest Strategies Unlimited report provides a detailed breakdown of penetration by form factors and application.