LED lighting: More intelligent, more beautiful, more affordable
The LED industry's products will be undergoing many changes over the next year or two, including improvements in efficiency, reliability, quality of light and, one can only hope, interoperability. But underlying all these advances will be the relentless pressure to deliver them at lower price points than today's lighting products.
Everyone agrees that the market for LED lighting will continue to enjoy dramatic year-on-year growth for at least the next few years. Strategies Unlimited, for example, estimates that the market for general LED lighting, which totaled just less than $6B in 2014, is projected to grow to 14.9B by 2018. Those replacement lamps, strips and strings, outdoor area, industrial, commercial, residential, consumer portable, entertainment, retail display, off-grid and safety/security represent about 57% of the total LED market of $25.9 billion projected for 2018. The other 43% or the market is expected to consist of signage, automotive lighting, mobile devices, backlighting in displays, monitors and other specialized applications1.
As a result, most LED manufacturers anticipate record market growth during the next 2 to 3 years. Dr. Jacob Tarn, Samsung's executive vice president of LED lighting, expects that the LED market will grow to take over 50 percent of the total lighting market by 2018.
A healthy slice of this growth will come from new construction, according to Steve Kennelly, lighting vertical market manager at Microchip Technology. He expects that declining equipment costs and changes in construction codes will boost the number of new buildings being built with LED lighting to grow rapidly from roughly 10% today to 75% or more in the next few years. Kennelly also notes that replacement bulb sales will climb for the next few years and then begin to decline as fixtures with integrated LEDs become more commonplace.
And now that the incandescent replacement market has been kick-started, tube-style T3/T5/T8 replacement/retrofit products appear to be the next low-hanging fruit. There are literally hundreds of millions of relatively inefficient ceiling fixtures lurking in stores, offices, and industrial buildings just waiting for cost-effective upgrades which save both energy and maintenance costs.
But in order to realize the opportunities emerging from this explosive growth, players at all points along the LED lighting value chain will have to confront several hazards that lurk within this rosy outlook.
Heed the solar industry's history
Although the complex interplay of technical advances and economic forces driving the LED market can be difficult to understand, one need only to look at the history of the solar industry to get a good sense of some of the challenges the LED industry will face. As the declining cost of solar cells drove the cost of PV panels to below $1/W, they also put significant price pressure on the inverters, racks, wiring and other balance-of-system (BoS) components required for complete solar power solution. Similarly, as LED prices decline, they are forcing the remainder of an LED light's BOM elements to maintain a rough parity. As a result, the shrinking BOM cost of a modern LED lamp remains roughly divided into roughly equal thirds between its LEDs, housing/heatsink, and drive electronics.
The LED incandescent replacement bulb market represents only a portion of a much larger market but, in many ways, it is the cutting edge of the industry, currently dealing with many of the challenges other market segments will have to face a few years from now. With that in mind, let's take a quick look at the declining price of LED bulbs, and how that pressure affects the value chain behind the products that show up at your local big box store.
John Perry, marketing manager for Texas Instruments lighting power products, observes that "Even without rebates/incentives: 60W LED bulbs costing under $10 have been prevalent for about a year now. It’s becoming more common to find them for under $5 if you know where to look. With subsidies from state governments and local utilities thrown in, I think a retail price of $2 or less on a consistent basis may be a reality before the end of 2016."
Perry also notes that 100W equivalent products don't appear to be enjoying equal popularity, most likely due to their higher cost at present. "Without rebates, I am noticing 100W products remain around $10, or just under. But I suspect they will be consistently under $5 in 2016. Spot lights (PAR) will probably remain closer to $10."