Industry Dynamics

How Big Can The LED Lighting Market Get?

  • Share :
Now let's transition to an examination of market data centered on lighting products presented in the Plenary by Smallwood on day one of the Strategies in Light (SIL). The presentation was entitled "How big can the LED lighting market get?" Smallwood addressed both the lamps and luminaires markets.

Smallwood moved into a leadership position in the Strategies Unlimited lighting practice in late 2013. He has since revamped the approach that the firm takes to characterize the lighting market. The research has been expanded to cover lighting products based on all types of light sources - not just LED-based products. The data is segmented for form factors and applications. And Smallwood has led development of a market model that can yield regional geographical segmentation of the market. Smallwood also said the new approach will enable more accurate prediction of saturation by long-life, LED-based products and the coincident shrinking of market potential.

Starting with the lamps market, Smallwood said there are around 45B installed lamp sockets in the world with that number only growing incrementally in the coming years (Fig. 14). Today, 9B incandescent products are installed in those sockets with that number projected to fall to less than 2B by 2022. Smallwood's projection shows that linear fluorescent and compact fluorescent (CFL) technologies will remain prevalent through 2022. Primarily, LED-based replacement lamps will replace the incandescent incumbent with some displacement of fluorescent and halogen technologies.

Recognize, however, that there is a vast difference between the installed base and shipments of lamps throughout the forecast period; Strategies Unlimited's new model allows the analysts to report both, and by region or globally. For example, Fig. 15 depicts the difference in the North America region specific to A-lamps. The installed base chart on the left of Fig. 15 shows a strong presence of incandescent products, whereas shipments of such products will drop precipitously as LED lamp shipments continue to rise.

The global installed base of lamps will remain a mix in terms of light-source technology through 2022.

The installed base of incandescent A-lamps in North America will decline slowly, whereas new shipments of such products have already plummeted as LED-lamp shipments rise.

Smallwood reported that LED lamps represented 5% of the overall 2014 market globally. He projects that penetration to rise to 28% in 2018 and to 52% in 2022. Those numbers may sound low, but remember the total lamp market includes tubes, and fluorescent technology will remain a major player. Indeed, Smallwood projects that fluorescent tubes will still account for more than 20% of lamp shipments in 2022.

Ironically, Smallwood also reported a very bullish outlook for LED-based replacement tubes as he broke the data down by type of lamp. Smallwood admitted that he never believed the concept of an LED-based replacement tube to be a very good idea relative to products such as integral, LED-based luminaires. But the research indicates that the market will heavily rely on such tube products primarily because of the ease of retrofit. Smallwood projects a 29% CAGR for tube shipments through 2022, although the growth will flatten at the end of that period as sockets are saturated.

Overall saturation will be felt far more acutely. Total lamp shipments will decline by 44% through 2022. Other than the tube market, all of the other lamp types will be in decline in terms of units shipped by the end of this decade.

Still, the lamp market will remain sizeable in terms of revenue. Fig. 16 shows the lamp market charted by revenue and segmented by light-source technology. Revenue will peak at $21B in 2018 but still reach a hefty $16B value in 2022.

Smallwood also covered the luminaires space. And the Strategies Unlimited team has developed a far more granular model for the broad luminaires segment. The team is now segmenting the market by different types of fixtures including:
1. Downlights
2. Troffers
3. High bays
4. Suspended pendants
5. Tracklights
6. Street lights

Moreover, the new model includes the ability to sort the data by application including retail, office, hospitality, and more. The two types of segmentation can be applied individually or together. And in terms of LED-based fixtures, Strategies Unlimited is separately tracking fixtures that use LED-based replacement lamps and fixtures based on integral, LED-based designs.

Global lamp revenue will peak in about four years as socket saturation with long-life LED-based products takes place.

The global luminaire market will grow slowly through 2022, but LED-based products will represent an increasingly large share of that revenue.

In 2014, the combination of both types of LED fixtures represented less than 4% of the total luminaire market in terms of the installed base. But again installed base and shipments differ. Fig. 17 provides an excellent picture of both market size and the light-source technologies that will ship in luminaires. Luminaire revenue will only ramp from $59B in 2014 to $66B in 2022. But as mentioned at the beginning of the article, 69% of the luminaires will be LED-based in 2022.

Smallwood closed his presentation with some interesting thoughts. He said, "The lighting world has accepted that LEDs are the future." Still, he characterized the transition as an evolution from the filament to LED sources. He added, however, that there is a revolution afoot in addition to the changing light sources.

Smallwood said, "The revolution is the ancillary products and technologies such as networks and controls that are coming along with LED lighting." Smart lighting based on sensor-driven autonomous or programmatic controls is a good example. Smallwood also suggested that the revolution will deliver "lighting with a purpose." He said lighting will specifically target needs such as human wellbeing, productivity, security, and safety.