Cleantech Market Intelligence
Lighting Suppliers Face Contracting Market
Two recent acquisitions by lighting company giants reveal an important trend in the broader lighting industry. In late November, General Electric acquired Colorado-based Albeo Technologies, a manufacturer of LED lighting with a focus on integrated wireless controls. In early January, Acuity Brands purchased California-based Adura Technologies, a startup company specializing in wireless lighting control. As detailed in Pike Research’s 2012 report on Intelligent Lighting Controls, all of the major lighting companies have made one or more acquisitions in the last few years that give them access to new and innovative means of controlling the lighting products that they already offer.
It’s no secret that the rapidly dropping cost of LED lighting is proving to be a major disrupter in the lighting industry. While actual adoption rates are still modest, the promise of a lamp type that will be more efficient as well as fully dimmable, easily controllable, and mercury-free has resulted in a focus on the technology that far exceeds current sales. R&D dollars are shifting and product lines are quickly expanding, as no big lighting company can afford to ignore the light source that is broadly acknowledged to represent the future.
The Larger Threat
The acquisition of companies that are focused on controls, however, exposes a larger and much more challenging threat to big lighting companies: the overall pie is shrinking. As Pike Research forecast in our 2011 report, Energy Efficient Lighting for Commercial Markets (update coming in March 2013), global revenue from the sales of lamps and luminaires in commercial buildings is expected to drop significantly in the coming decade, from a peak $54 billion in 2012 down to $30 billion by 2021. This decline will be primarily driven by the much longer life of newer fluorescents and LEDs. While revenue from LED sales will increase, those sales will not even come close to offsetting the inexorable contraction of the market. So, for big lighting companies, updating their product lines with new LED lights will not be enough.
Seen in this light, the frequent acquisitions over the past couple years of startups that focus on lighting controls is an indicator of a long-term shift in strategy. General Electric and Acuity have traditionally been known for lamps and luminaires, not for lighting controls. But these big players can no longer afford to simply maintain their traditional roles in a changing industry. Expanding to new types of products and revenue streams has become a necessity, and lighting controls are the logical choice.
This promises to be a boon to the wide range of new and innovative methods for controlling lights, from the local strategies of providing just the right amount of light based on current occupancy and daylight levels, to the networked strategies of providing detailed analysis and complex control to building managers in remote offices. The shift will surely be challenging for the big lighting companies; but it’s an exciting signal for the broader adoption of smart lighting control strategies that can be expected to ensue.