Market research firm Frost & Sullivan reported that the LED lighting market earned about $3.57 billion in 2011. The firm forecasts the market to grow to an estimated $23.24 billion by 2018.
100 years ago, it was unthinkable that a luxury item such as the electric light would be in danger of becoming a commodity, but that is the situation the industry faces today. Once again, those who will succeed will realize that customers can’t determine which products are better, they can only tell which products are different.
While traditional players wait-and-see, the high-growth LED market has given electronics companies a platform to enter the lighting industry and introduce very different capabilities. Kevin Dexter, Samsung’s senior vice president of home appliances, said, “A light bulb is no longer just a light bulb. It’s a digital technology made up of LED chips, drivers and electronics—familiar turf for Samsung.”
Like Samsung, other newcomers are using their technology backgrounds to disrupt lighting majors like GE and Eaton. LG Innotek currently ranks fourth in global LED package sales. In September, Cree became the first company to adopt the voluntary standard set by California regulators to make bulbs that produce light similar to the warm, white color of incandescents when it launched the TrueWhite series. This follows the company’s introduction of the $10 LED bulb.
What does this mean for traditional players? Companies that have products with a unique niche in the marketplace will be more successful, and eventually rise to power. Slow-to-marker players currently depend on competition between LED chipmakers and component manufacturers to reduce their input costs; however, they may benefit from playing suppliers off of each other and using lower supply costs to compete on price in the end market for the time being. As Phillips is taking a unique approach with Hue, which gives people the ability to connect their lights to their wireless home network, traditional players need to differentiate their way out of the race to the bottom.
What do you think about the changes the lighting industry is seeing? How do you feel niche players will fare against the traditional giants
