Since March 2020, the global business arena has been witnessing turmoils because of the COVID – 19 virus related challenges. Most of the industries had to either completely suspend some of their business lines or trim operations – thereby the commercial establishments were also mostly running with thin attendance. The effect of COVID – 19 has also been seen in the social sphere. As lighting is a common requirement in all these areas, it goes without saying that this industry has also suffered a lot. Thus, this is the best time to assess the future potential of this industry.
As far as the lighting industry is concerned, it is so vast that it’s not possible to focus on all its segments and sub-segments within the short span of one article. Thus here, I will talk about a few selected segments of this ubiquitous industry.
In today’s world, we all are concerned about the climate change, high level of pollution and so on. Although, initiatives are growing almost all over the world for generating more power through the renewable means, it will take many years from now to completely eliminate the harmful fossil fuel-based power plants. Till then, we are left with no other way but to practise energy efficiency. Thus today, it is a unanimously accepted fact that our primary focus should concentrate around energy efficient lighting.
The status quo of energy efficient lighting
As per Research Dive, a market research firm based in Pune, India, ”The global energy efficient lighting market is likely to register a revenue of $370.4 billion by 2027, at a CAGR of 8.4% during the forecast period from 2020 to 2027.”
Their report states that the growing adoption of energy efficient lighting due to its various benefits, such as long shelf-life and greater energy savings is the major factor anticipated to accelerate the growth of the global energy efficient lighting market over the forecast period. Besides, various government initiatives to adopt LEDs for better efficiency is another factor estimated to boost the growth of the global market. Moreover, the growing attention of people towards adoption of smart LED lighting solutions are predicted to generate massive opportunities for the market by 2027. However, the high equipment and implementation costs associated with energy efficient lightings may restrict the market growth in the coming years.
Effect of COVID – 19: Research Dive finds that the outbreak of COVID-19 has impacted the growth of the energy efficient lighting market in a negative way, majorly due to the shortage in the supply of electric components across the globe. Besides, the lack of proper supply of components due to lockdown imposition and strict government guidelines has resulted in the delay of residential projects. However, several companies functioning in the global market are coming forward with strategic steps to help society during the coronavirus pandemic.
Most profitable sub-segment: The same report communicates that by source type, the Light Emitting Diodes (LEDs) sub segment generated a revenue of $85.8 billion in 2019 – and is predicted to dominate in the global industry by 2027. The significant growth of the LED sub-segment is majorly attributed to its various benefits compared to other type of lights, such as its energy efficiency, long life, high intensity and brightness, low radiated heat, reliability, instantaneous illumination, directional lighting and other benefits.
Largest market share: As per them, by application type, the commercial sub-segment valued for $73.3 billion in 2019 and is predicted to hold the dominating market share over the forecast period. This is mainly due to the penetration of LEDs in commercial sectors. In addition, the key players functioning in the global market are offering various energy efficient lighting solutions as per its uses.
Region to witness significant growth: By region, Research Dive expects that the North America energy efficient lighting market valued for $68.3 billion in 2019, will garner a revenue of $119.6 billion by 2027. The significant growth of the region can be attributed to the strict government & industry regulations and the rapid adoption of latest technologies. Moreover, many energy-efficiency programs in the region, such as ENERGY STAR certification, DLC programs, and the Lighting Design Lab certification that increase the outreach of energy efficient lights is also expected to bolster the regional market growth by 2027.
Most visible players: According to the market research company, based on several aspects, such as business & financial performance, strategic moves by key players, latest developments, product portfolio, and SWOT analysis, some of the top players of the global energy efficient lighting industry are: Eaton, General Electric, Philips, Toshiba Corporation, Schneider Electric, ABB, Advanced Lighting Technologies Australia Inc., Bridgelux, Nichia Corporation, and Digital Lumens, Inc.
Progress of LED-based lighting systems
Although by now, LED-based lighting systems have been quite popular in the global market and successfully captured a large share pushing away the CFLs and GLS lamps, they still have a good potential for growth. According to the recent report titled, ‘LED Lighting Market – Growth, Trends, COVID-19 Impact, and Forecasts (2021 – 2026)’ by Research And Markets, “The LED lighting market was valued at USD 75.81 billion in 2020, and it is expected to reach USD 160.03 billion by 2026, at a CAGR of 14.25% over the forecast period 2021 – 2026. An estimated savings of USD 18 billion in electricity costs can be achieved by transitioning to energy-efficient LEDs. Furthermore, more than 160 million metric tons of carbon dioxide emissions can be avoided every year.”
Thus, there can’t be a second thought on the growth potential of the LED-based lights. The recent report by Research And Markets also echoes that – Lighting accounts for nearly 10% of electricity usage in households and 18–40% of commercial premises. There is a growing need for energy saving across the world, which is creating scope for the market. It is expected that the transition to energy-efficient lighting would reduce the global electricity demand for lighting by 30-40% in 2030.
Their researchers find that countries across the world are widely adopting LED lighting. For instance, New York planned to replace 250,000 streetlights with LEDs, which was to be followed by the replacement of decorative lights in the urban areas. Barcelona (Spain) deployed more than 3,000 smart streetlights based on LED technology, which gathers information about pollution, humidity, noise, and the overall environment.
They state that the growing consumer awareness about the environment and the durability of these lights and the government mandates for energy efficiency are the drivers for the growing adoption of LEDs. For instance, as part of its green initiatives, the Chennai Airport bought six sets of LED base lights for disaster relief to make its lights and fixtures energy-friendly.
According to this group of researchers, “Smart lighting is expected to be the future of LED lighting, with various companies, like Philips, Magiclight, and Xiaomi, investing in the technology. Philips is one of the market leaders with its product, Philips Hue, which can be integrated with voice assistants.
The report finds that in the current market scenario, LED light bulbs are enduring the early adoption phase of the product life cycle. However, continued technological advancement in LED lighting poised these product offerings to enter and advance through the growth phase. Recent advancements in light-emitting diode technology have allowed LED lighting products to penetrate the commercial lighting market, with enormous potential for growth. Commercial buildings, including offices, stores, restaurants, hospitals, and schools, account for almost 20% of the United States’ total energy consumption, and 38% of this energy consumption is attributed to lighting.
Trends in support of growth: Major American manufacturers are actively developing the LED lighting business with the rising LED lighting penetration rate. LED commercial lighting demand is strong in the US market, among which demand for Troffer, panel lights, tunnel lights, and high bay lights grows fastest, and they begin to develop towards intelligence and optical communications and other new application areas.
For instance, Technical Consumer Products Inc. offers its selectable commercial recessed downlight that comes with choices for colour temperatures and wattages, making these adaptable for many corporate settings.
Overall, the rapid urbanization and the increasing construction activities in the commercial sectors of different countries are expected to fuel the studied market demand in the foreseen period. However, with the onset of the COVID-19 pandemic, the short-term forecast indicates a decline in demand as several commercial constructions halted temporarily.
Observations on significant growth potential: This report finds that in Latin America, nearly 80% of the total population resides in urban areas, which is expected to rise during the forecast period. By the end of 2045, urban dwellers are estimated to increase by two billion globally. Thus, in such a scenario, it becomes essential for countries to use energy more efficiently and fuel the market’s growth.
The growth of the LED lighting market in the region can be attributed to the declining manufacturing cost of LEDs and the increasing demand for energy-efficient and sustainable lighting. For instance, Brazil, which used to import LEDs, has now set up many manufacturing facilities to accelerate its adoption in commercial, industrial, and government public sectors.
Moreover, the Brazilian government issued a decree to replace incandescent bulbs with LED lighting products used in various road lighting and tunnel lighting. Also, healthy economic growth, robust industrialization, and urbanization tend to be some of the market’s macroeconomic factors.
Furthermore, growing awareness over the importance of energy efficiency, coupled with the regional government mandates to set higher standards for more energy efficiency and continuous innovations in LED technology by the leading manufacturers, is a significant factor driving the growth of the market in the region.
Buildings are among the largest consumers of electricity worldwide. However, according to estimates, 80% of the energy efficiency potential of the buildings is not utilized. For instance, Rio de Janeiro consumes 60% more public lighting energy than New York City.
A glimpse of the competition in the market
As per the researchers of Market And Research, “The LED lighting market is fragmented due to many regional and international players across the world like Heliospectra AB, Dialight PLC, Eaton Corporation, General Electric Company (Savant Systems Inc.), and OSRAM GmbH. With a prominent share in the market, these major players are focusing on expanding their customer base across foreign countries. These companies are leveraging strategic collaborative initiatives to increase their market share and increase their profitability. However, with technological advancements and product innovations, mid-size to smaller companies are increasing their market presence by securing new contracts and by tapping new markets.
Thus, it is very clear that in the coming days, the big players will try to capture more and more unexplored and under-explored territories, at the same time the smaller companies will try to tighten their commands over small pockets showing their technical superiority.
By P. K. Chatterjee (PK)
