Navigant Research Blog

LEDs Experience Growth but Commercial Lighting Market Revenue Declines

Krystal Maxwell — April 7, 2017

According to the US Energy Information Administration (EIA), lighting in the commercial sector (which includes commercial and institutional buildings) and public street and highway lighting consumed 11% of total commercial sector electricity in 2016. LEDs provide more efficient lighting alternatives to traditional lighting options–such as incandescent, fluorescent, halogen, and even compact fluorescent lamps in the commercial market. The increased efficiency, decreasing prices, and longer lifespan of LEDs have spurred their growth in the lighting market. Lighting is considered low hanging fruit for efficiency upgrades in commercial buildings, as these technologies are cheaper than other building upgrades focused on efficiency.

Decline of the Commercial Lighting Market

According to Navigant Research’s recent report, Market Data: Energy Efficient Lighting for Commercial Markets, global lamp revenue is expected to decline at a 0.8% compound annual growth rate (CAGR) between 2017 and 2026. The decline is modest due largely to the expected number of replacement lamps needed for burnouts during the forecast period. While total global market revenue is expected to decline, LED revenue is the only lighting technology revenue expected to experience growth during this time. The total global number of lamp shipments is expected to decline at a quicker pace than revenue due in large to part higher priced LEDs.

Lamp Revenue by Lamp Type, World Markets: 2017-2026

(Source: Navigant Research)

The Implications 

When we think of a thriving market, we think of an ever expanding market where there is room for all interested parties to get a piece of the pie. However, due to LEDs’ increased efficacy, long lifespan, and continued market penetration, the overall lighting market is declining. This means there is an oversaturation of lighting manufacturers that will experience revenue declines.

The declining market is experiencing fierce competition. Smaller companies are suffering because they have less resources and might not be equipped to compete against the largest lighting incumbents. In order to stay competitive, lighting companies must shift how they generate revenue. Today, lighting companies are finding alternative ways to generate revenue that are changing the lighting industry. Some companies have been successful with new technologies, such as visible light communications for indoor positioning, some are expanding their lighting controls offerings, and others are experimenting with new business models, such as lighting as a service. Lighting companies will need to define their offerings and demonstrate their competitive edge to solidify their place in the changing lighting landscape.

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