Lighting manufacturers' profit margins are threatened by LEDs' longevity and price pressure. One result will be a stronger move into smart lighting.
For LEDs, the push into the building lighting market is well under way, driven by the technology's improving energy efficiency and a longevity that is almost unmatched by competing lighting technologies. Memoori's analysis (subscription required) indicates that market penetration expressed in terms of overall revenue generation of lighting in buildings grew to around 14% at the end of 2013.
Beyond the often-cited initial cost barrier, factors such as the incompatibility of legacy lighting systems, mixed consumer awareness, and perceptions of LED lighting are still to be overcome. It seems clear that several different lighting technologies will coexist for a few years to come.
Though the buying choices and procurement philosophies of consumers and commercial facility managers have traditionally focused on initial costs, one of the key benefits of a switch to LED lighting lies in its lower total cost of ownership.
The goal for LED manufacturers is now to convince consumers to migrate from a fixed cost of light to a service cost. Five-year payback is a very tough sell; lighting controls can move payback nearer to two or three years. (How quickly a return on investment can be made on LED lighting versus traditional lighting methods depends, of course, on both the application and the proportion of time the light is switched on.)
The current rate of cost decline in LED lighting systems is about 18% a year. At the time of our research, the average global selling price of LED light bulbs that can replace 40-watt incandescents had declined to $15, while that of 60W-equivalent LED bulbs dropped to around $21. Prices will continue to drop significantly year on year until around 2018 before starting to level off.
Successful revenue growth in LED lighting will be dependent, not only on promises of longer life and energy efficiency, but also on effectiveness, upfront costs, consumer confidence, and improved functionality. Fo survive in an increasingly competitive marketplace, LED manufacturers will have to embrace innovation and continue to invest in R&D.
Memoori's research shows that smart lighting systems are in use in a very small percentage of buildings. LED lighting's controllable nature makes it well suited for use with sensors in smart lighting applications for a number of purposes, including increasing energy savings.
With the Internet of Things coming closer to reality, and LEDs providing the potential to control every aspect of a light's characteristics, smart lighting control systems provide another huge potential growth area for lighting companies.
LED lighting systems are helping to stimulate increases in the installation of intelligent lighting controls such as occupancy sensors, photosensors, and the wireless networks that link them. Combining digital LEDs with advanced sensors, control systems, and artificial intelligence will reduce the need for separate systems to manage each of these functions.
Also, a growing number of innovative companies and universities have demonstrated the potential of Visual Light Communications (LiFi). These experiments indicate that a visible light communication system can be produced to transfer data at speeds up to 10 Gbit/s, which is 666 times faster than average broadband speed in the UK.
This guest post from Memoori's research director outlines research from the firm's report LED Lighting in Buildings 2014 to 2018, now in its second edition (subscription required).
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