- LED Lighting
- Energy Efficient Lighting
- Lighting Controls
Minimal Growth in the Lighting Market Spurs Market Disruption
Mass adoption of LED lighting in the commercial buildings market has been driven by energy codes and standards, longer life, increased energy efficiency, and declining prices. Within new construction, the cost difference of LED lighting is negligible compared with legacy lighting technologies, as installation costs of a lighting system is inevitable no matter the lighting type. Even within the retrofit market, ROI due to increased energy savings and longer lifespan of LEDs has helped provide justification for the upgrade to this technology.
The shift to LED lighting in the commercial building market is resulting in a relatively flat market for LED lamp and luminaire revenue due largely to the longer lifespan of the technology. In a recent report, Energy Efficient Lighting for Commercial Markets, Guidehouse Insights estimates that lamp revenue is expected grow at a low 1.4% compound annual growth rate (CAGR) from 2019 to 2028. While LED lamp revenue is projected to grow at a 6.9% CAGR during the same period, all other lighting technologies are expected to see significant declines. The lighting market may still have a need for components, but the industry is shifting to address a market saturation of LED lighting and the longer lifespan of the products. This shift is from a commodity market to broader solution offerings.
Changes Within the Industry
The stagnant revenue of the commercial lighting market has resulted in declining revenue for many manufacturers and has led to change within the industry as manufacturers ultimately look to focus efforts on areas they excel. Cree, a lighting incumbent, recently announced it will sell its Lighting Products business for $310 million to IDEAL INDUSTRIES, INC., a 100-year old electric power control and management company. IDEAL provides products to a number of industries, such as data communications, aerospace, electrical, wire processing, automotive, and construction. IDEAL is already familiar with the lighting market through its Audacy Wireless Lighting Control division; the acquisition, which includes LED lamps, luminaires, and corporate lighting solutions, will expand the company further into the commercial lighting market. Cree has experienced declining revenue in its lighting business unit in recent years, and has continued to focus on the power and radio frequency semiconductors business unit, Wolfspeed, which has helped the company see overall growth in revenue.
This quickly evolving market is creating uncertainty for many lighting manufacturers. Many companies have spun off or sold their lighting businesses, such as Philips in 2016, Current, powered by GE in 2018, and a recent announcement by Eaton to spin off its lighting segment by the end of 2019. Limited revenue opportunity in the lamp and luminaire market coupled with increasing end user interest in lighting controls and advanced solutions has prompted more lighting control solutions and shifted competition in the controls and connected lighting systems market. This trend is one that will continue, as an increased number of connected devices leads to more available granular data and analytics with solutions through this to address customer pain points.