According to the US Energy Information Administration (EIA), electricity consumption of lighting in the commercial sector (including commercial and institutional buildings) as well as public street and highway lighting in 2016 has only accounted for 11% of total commercial sector electricity. Due to the high efficiency of LED lighting, the proportion has been lowered significantly than using incandescent, fluorescent, and halogen lights in the market. LEDs have experienced a rapid growth due to their high efficiency, decreasing price, and prolonged lifespan. Compared to other breakthroughs regarding efficiency, lighting is considered as low hanging fruit as these technologies are much cheaper.
Decline of the Commercial Lighting Market
According to a recent report of Navigant Research, global lamp revenue is estimated to reduce at a 0.8% compound annual growth rate (CAGR) between 2017 and 2026. Considering the number of lighting fixtures for burnout replacement, the decline could be modest. As the worldwide lamp revenue is going to reduce, revenues on LED lighting is the only portion that expected to increase during the period. However lamp shipments will probably experience a decline due to the relatively higher prices of LEDs.
The diagram below shows lamp revenues from 2017 to 2026 generated by different lamp types:
Normally a thriving market means that there is enough space for every interested party to get a piece of the pie. However, due to the LED’s increased efficiency, long service life, and in-depth market penetration, the whole lighting market is declining. In other words, the lighting market is oversaturated.
Competition in such market is fierce. Smaller manufactures are in a difficult situation because they have less resources thus less competiveness to compete against larger companies. Lighting companies have to change the way how they generate revenues in order to keep competitive. Even the new ways to generate revenue are bringing significant changes to the lighting industry. To be specific, some companies are developing visible light communications for indoor positioning, some are shifting their business models, lighting as a service for example. All in all, every lighting company must do some changes on their offerings as well as their operating models to stabilize their positions in the market.