The past nine months or so have revealed LED and solid-state lighting (SSL) sectors not sure about their own future. Investments in R&D and marketing have slowed. You can see the evidence in the size of our issues, which is set by the number of ad pages we sell. You can see evidence at industry events. LightFair International (LFI) was a prime example, and I discussed some of that in our recent feature article on the event. Our industries are in what appears to be a recession even while most business sectors remain in growth mode.
Now there are some legitimate issues that have hit the LED and SSL sectors. Price erosion has been a recurring problem. China wants to race to the bottom in price. In the US, the Trump tariffs and fear of trade wars on multiple fronts have impacted the lighting business more so than many other sectors. Our biggest players including Osram, Philips/ Signify, and Current/GE have all been through major transitions in structure and ownership driven in part by the end game for the incandescent lamp. And there has also been restructuring and merger & acquisition activity below the big three as well.
Still, we should be looking up and not down as we gaze into the future. It's true that LEDification, or the retrofit of lighting with LED sources, has hit penetration rates around 30%. And generally long-lived LEDs won't undergo regular replacement cycles. Many manufacturers began to fear market saturation two or more years ago.
I would think, conversely, that 70% equates to a healthy business opportunity for the next several years. Moreover, the opportunity is really much larger than a 70% retrofit. Already the early projects in the LEDification retrofit phase are being retrofitted a second time. Moreover, I've observed repeatedly that the desire for better light quality puts much of the lighting ownership base much nearer the start of the LED transition process than the end.
I was just at the IES (Illumination Engineering Society) Street and Area Lighting Conference (SALC) in San Diego. And street lights were one of the early adopter markets for LED lighting. The first SALC I attended was in Huntington Beach, CA back in 2010. It was a great location because Los Angeles was nearby, and that city was an early mover in LEDs. Indeed, we got to tour some Los Angeles installations and the city's Bureau of Street Lighting.
Los Angeles would go on to convert 95% of 220,000 lights that the city owns. Fast forward to 2019 SALC, and Norma Isahakian, current executive director of the bureau, said the city has begun to replace the earliest of the LED lights and continues to deploy connectivity on luminaires, looking toward more smart city applications. In street lights, specifically, just the CCT debate will drive retrofits of retrofits — more on that in our next issue.
The fact is that there is business aplenty for a significant amount of time in most sectors. Prices and margins are lower than we would prefer. But customers are starting to understand that they must pay more for quality. Moreover, the industry gets more time to figure out value propositions for smart buildings and smart cities, even if those technologies have taken longer to deliver revenue than we would have preferred.
Our industries, however, must get over the fear of their own shadow. Some organizations are going to be proactive and make money here. Is yours one of them?
Maury Wright
EDITOR
