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The Global LED Lighting Market

Key Trends and Opportunities

Presented to
Tekes
June 2015

Total Lighting Market, including Traditional


Control Gear is the Fastest Growing Segment
Global Lighting Market: Historical and Forecast Market Size by Segment, 2014 & 2020

Control gear to gain a pivotal role with the


Year/USD bn

Lightsources

Control Gear

Fixtures

2014

24.4

7.9

55.0

2020

25.7

11.2

60.5

CAGR (2014-20)

1.0%

7.4%

1.9%

.
Source: Frost & Sullivan

rise of LED due to the long term increase on


functionality
The possibilities that LED offers will give
rise to increasingly complex control gear
giving comfort, security and flexibility to

120,000

lighting that has thus far only been seen in

100,000

niche markets

80,000
USD million

Fixtures
60,000
40,000

Control gear
Lightsources

The average price of control gear is


expected to rise notably in Europe and North
America by 2019 on top of the increase in

20,000
0
2012 2013 2014 2015 2016 2017 2018 2019

units globally

Lighting Industry and Markets


The LED revolution is happening now 40% of the market in value in 2015
Global Lighting Market: Historical and Forecast Market Size by Segment, 2014 & 2019

2013 and 2014 have been the


breakthrough years for LED in the

Year

Traditional
(USD m)

LED (USD m)

2014

54,972

27,261

27,261
-13.1%

70,100
16.8%

2019
CAGR (2014-19)

professional market, in Europe, North

.
Source: Frost & Sullivan

America and China. The other green


technologies are on the way out
2014 has seen significant inroads for

120,000

LED in the large residential market,

100,000

which will help LED to pass 40%


penetration of total lighting sales in
2015

USD million

80,000
60,000
40,000
20,000
0
2012 2013 2014 2015 2016 2017 2018 2019

LED
Traditional

Global LED Lighting Market


Revenue Forecast
Key Takeaway: the 2014 boom was driven by Europe, North America and China across applications; LED
replacement bulbs made significant progress in the Residential application worldwide

80,000.0

45.0

70,000.0

40.0

60,000.0

35.0
30.0

50,000.0

25.0

40,000.0

20.0

30,000.0

15.0

20,000.0

10.0

10,000.0

5.0

0.0

0.0

2012
2013
2014
2015
2016
2017
2018
2019
Revenue
16,939.0 23,936.0 32,285.0 40,070.0 47,303.0 54,361.0 61,854.0 70,100.0
Growth Rate
41.3
34.9
24.1
18.1
14.9
13.8
13.3
Year

Growth Rate (%)

Revenue ($ Million)

Total LED Lighting Market: Revenue Forecast, Global, 2012-2019


CAGR, 20142019 = 16.8%

Note: All figures are rounded. The base year is 2014. Source: Frost & Sullivan

Global LED Lighting Market


Key Figures (1/2)
Total LED Lighting Market: Market Engineering Measurements, Global, 2014

Market Overview
Market Stage

Growth

Average Price Per


LED Lightsource

Market Revenue

$32,285 M

$12.4

(2014)

Base Year Market


Growth Rate

Compound
Annual Growth
Rate

16.8%

34.9%

(CAGR, 20142019)

Decreasing

Stable

Market Size for


Last Year of Study
Period

$70,100 M
(2019)

(2014)

Customer Price
Sensitivity

7
(scale:1 [low] to 10 [high])

Degree of
Technical Change

9
(scale:1 [low] to 10 [high])

Market
Concentration

16.7%
(% of market share held by top
2 companies)

Increasing
Note: All figures are rounded. The base year is 2014. Source: Frost & Sullivan

Global LED Lighting Market


Key Figures (2/2)
Competitor Overview

Total Addressable Market


Number of
Companies that
Exited*

Number of
Competitors

5,000

Number of
Companies that
Entered*

30

10

(active market competitors in


2014)

Replacement Rate

(2014)

1522 years
(average period of unit
replacement)

(2014)

Industry Advancement
Average Product
Development
Time

912
months

Decreasing

Stable

Increasing

Average R&D
Spend as a
Percent of Market
Revenue

7.6%

Marketing Spend
as a Percent of
Market Revenue

5.0%

*Note: Companies with revenue of more than $50.0 M


Note: All figures are rounded. The base year is 2014. Source: Frost & Sullivan

Global LED Lighting Market


Europe and North America to mature first; higher growth rates during the
forecast period in younger markets
Europe: The implemented EU ban on incandescent and the
prospective ban on halogen drive LED adoption in the region.
CAGR 20142019 = 17.2%

North America:
Incandescent ban
stimulates demand;
utilities rebates
make SSL
affordable.

Asia-Pacific:
China is
embracing
LED and will
lead the
change for the
region.
CAGR
20142019 =
16.8%

CAGR 20142019 = 15.2%


Latin America: Price is the
key barrier to adoption outside
of high-end projects. LED will
increasingly be able to
challenge CFL.
CAGR 20142019 = 23.1%

Middle East and Africa: Growth expected


in the second half of the forecast period,
thanks to a sharp price decline.
CAGR 20142019 = 18.4%

Source: Frost & Sullivan

Global LED Lighting Market


Revenue Forecast by Region
Key Takeaway: APAC is confirmed the key area, especially outside of China in the long term
Total LED Lighting Market: Revenue Forecast by Region, Global, 2012-2019
CAGR, 20142019 = 16.8%

Revenue ($ Million)

80,000.0

60,000.0

40,000.0

20,000.0

0.0
2012

2013

2014

2015

2016

2017

2018

2019

Year
North America

Europe

Asia-Pacific

Middle East & Africa

Latin America

Note: All figures are rounded. The base year is 2014. Source: Frost & Sullivan

Global LED Lighting Market


Revenue Forecast by Application
Key Takeaway: Office and Industry will be the highest growth applications; Residential will be the largest
application by far by 2019
Total LED Lighting Market: Revenue Forecast by Application, Global, 2012-2019
CAGR, 20142019 = 16.8%
Revenue ($ Million)

80,000.0

60,000.0

40,000.0

20,000.0

0.0
2012

2013

2014

2015

2016

2017

Outdoor

Residential

2018

2019

Year
Architectural

Hospitality

Industrial

Office

Retail

Note: All figures are rounded. The base year is 2014. Source: Frost & Sullivan

Global LED Lighting Market


Percent Revenue Forecast by Distribution Channel
Key Takeaway: Wholesalers and retail have dominated the nascent stages of LED, and are now losing to direct sales
and project based solutions; however, indirect sales will grow as more standard products become available
Total LED Lighting Market: Percent Revenue* Forecast by Distribution Channel, Global, 2012-2019
100.0

Revenue (%)

80.0

60.0

40.0

20.0

0.0
Direct Sales
Wholesalers/Retail

2011

2012

2013

2014

2015

2016

2017

2018

30.0
70.0

31.2
68.8

33.0
67.0

34.0
66.0

35.0
65.0

34.0
66.0

33.7
66.3

34.2
65.8

Year

*The exhibit represents only the professional lighting end users and not the residential ones
Note: All figures are rounded. The base year is 2014. Source: Frost & Sullivan

Global LED Lighting Market


Key Messages
1

The LED revolution has happened, driven by


Europe, North America, and China. Further
growth will be less centralised and will challenge
the leading global participants.

LED replacement lamps are already at a price


point that successfully challenge traditional
technologies and will take over that market
completely by 2020.

The challenge is to offer noncommoditised


products that make the most of digital LED light
advantages. LED drivers and lighting
management services will be key.

The market for luminaires will be particularly


challenged, as LED requires new knowledge and
expensive R&D. Concentration in this very
fragmented market is expected.

New markets for services and solution designs


open up, but require good contacts and
customer knowledge, which might favour local
companies above global participants.
Source: Frost & Sullivan

Global LED Lighting Market


What next? 3 Big Predictions

The LED replacement lamp is the winner in the medium term, as it progressively replaces traditional
technologies around the world. The entire market for replacement lamps (the cash cow of the top
companies) is, however, doomed in the long term as next-generation fixtures will not have a lamp
socket.

The LED revolution will sweep away hundreds of fixture companies that cannot cope with the new
competencies and R&D needed. There is a chance for large LED lightsource manufacturers to save
good, medium-size fixture companies by providing the LED know-how in return for their help in
reaching local customers and winning project-based business together.

Lighting as a service (LaaS) on cloud-based networks for efficient and personalised management of
applications will pave the way for connected lighting and living, and better energy and facility
management. Financing, leasing, and maintenance are other service models that will evolve around
LaaS.

Source: Frost & Sullivan

Global LED Market


What next? Leveraging Lighting Management Systems to target verticals
Key Takeaway: Offices to focus on energy saving aspects, residential to focus on ambience

Global LED Lighting Market


What next? Services. Smart buildings, performance contracting and lightas-a-service are key trends driving future growth

Key Trends

Competitive
Landscape

Competitive
Success
Factors

Smart buildings, representing the convergence of green and smart technology trends,
will become increasingly important and a driver for consultancy based services.
Performance contracting is increasingly becoming a mainstay of the market; end
users are keen to maximise cost savings and improve efficiency.
Light-as-a-service (essentially leasing-type models and pay-as-you-use services) is a
concept that is gaining traction in the industry through its ability to enable businesses
to minimise upfront capital expenditure.
The increasing importance and value of lighting projects is attracting ever greater
competition within the sector.
BMS & FM companies are both actively targeting the sector.
Market participants need to be able to work in partnership with BMS companies, and
need to be able to work with not just light but also HVAC etc. With strong growth
forecast, establishing a market presence, a network of connections, and customer
relationships will be vital for future success. Supplies want to establish an entrenched
position.
With performance contracting becoming the customers preferred business model,
suppliers will need to develop service capabilities, or partner with facility management
companies, or energy service providers, to participate in the most dynamic part of the
market.

Global LED Lighting Market


What next? Services. Smart buildings to drive data-based consultancy
services
Smart buildings will become a mainstream reality, driven by the convergence of green and smart
technology and new market entrants.
Cloud-based services with a strong focus on data interpretation will be key enablers for a new
generation of intelligent buildings.
If lighting services companies manage to make a space for themselves in the data analytics
market, consulting contracts could potentially include very different new services -data based
services

Global LED Lighting Market


Performance contracting to become preferred business model
Performance contracting will become customers preferred business model and suppliers will need to
develop service capabilities or partner with facility management companies or energy service
providers to participate in the most dynamic part of the market.
EU energy savings
contract and
performance contracting
to grow at CAGR12-18
8.2% to reach 7,375.0
million by 2018.

Global LED Lighting Market


Light-as-a-service (LAAS)
Future trends in terms of business models include leasing-type models and pay-as-you-use
services.
The concept of light-as-a-service is expected by most market participants to pick-up as a service
offering in the future. Key advantages for the end-customer is the ability to use new technology,
increase comfort levels, and bringing related energy savings, whilst taking away the up-front
weight on the balance sheet of customers.
Where budgeting is a barrier for upgrades/retrofit, lease-type services will strive. Uptake is
expected to be faster in the industrial and public sectors.
X-as-a-service proposition is developing in adjacent and unrelated markets, and is proving a
success story. It would be interesting to study how quickly this type of services have picked up in
other markets (penetration rate), to understand typical conditions for success, and learn from
these other industries.
As reference, in the European passenger vehicle market, one of the oldest leasing markets,
the share of leased cars was 19% in 2011 and will grow to 23% by 2018.

Lighting Industry and Markets


Key Challenges for 2015
Description and Context

1
Offering Differentiation

Moving away from cost-based competition

2
Selling on Value
3
Refocusing on Total Cost
Ownership

Moving the core business from wholesale to services

Supporting a clients longer term vision in line with product design


benefits

4
Identifying Sector Specific
Routes to Market

Finding the best resource allocation model for a specific target


market

5
Selling to Developing
Markets

Correctly identifying and benchmarking the competitive landscape

6
Managing New Entrant
Disruption

18

Innovating to maintain a technical advantage

Lighting Industry and Markets


Challenges to Insights
Insight

1
Offering Differentiation
2
Selling on Value
3
Refocusing on Total Cost
Ownership
4

Moving away from cost-based


competition
Moving the core business from
wholesale to services
Supporting a clients longer term
vision in line with product design
benefits

Integrate Upstream Client


Decision Making

Minimise Client
Operational Risk

Provide Light Solution


Leasing

Identifying Sector Specific


Routes to Market

Finding the best resource


allocation model for a specific
target market

Manage/Educate Specifiers
more than End-Users

Selling to Developing
Markets

Correctly identifying and


benchmarking the competitive
landscape

Develop Better Market


Segment Models

Innovating to maintain a technical


advantage

Leverage Total Solutions

6
Managing New Entrant
Disruption

19