October 15, 2013…Market research firm IHS Inc. notes that falling prices and rising consumer acceptance are helping LEDs take over the lighting business. IHS forecasts that the take over of the lighting business will spurn a 96 percent increase in revenue for packaged LEDs between 2013 and 2016. Packaged LEDs are LED chips with a protective cover and contacts for direct soldering. IHS predicts that global revenue for packaged LEDs used in lighting applications will nearly double to $7.1 billion in 2016, up from $3.6 billion in 2013.
“As retail prices for LED lamps have fallen, it’s become more obvious that they are an attractive alternative to conventional light bulbs, providing long-term savings in energy and replacement costs,” said Stewart Shinkwin, market analyst, lighting and LEDs, for IHS. “Because of this, shipments of LED lamps for lighting are set to increase dramatically in the coming years, rising to 2.4 billion units in 2016, up from 520 million in 2013. The rapid expansion of the lighting market will come as a major boon to suppliers of packaged LEDs, which are seeking the next growth opportunity following the slowdown of the backlighting business.”
IHS points out that previously, rapid growth in the packaged LED market was driven by LCD display backlighting in applications such as mobile phones, notebooks and TVs. However, according to IHS, the majority of these display applications have completed their transition to LED technology. Therefore, IHS forecasts that while LED demand for these products remains stable, annual unit growth largely is limited to single-digit percentages.
The lighting market will provide the next wave of growth for packaged LEDs, according to IHS. IHS figures reveal that the lighting sector became the largest end application for the packaged LED market in 2012, overtaking the TV backlighting market. The LED backlighting market is saturated, IHS says, and this market saturation has resulted several leading suppliers of packaged LEDs to shift their focus and development resources toward the lighting industry.
Penetration of LEDs into the lighting market is set to increase, IHS asserts, because of decreasing LED lamp retail prices and better consumer understanding of total cost of ownership of LED lighting and their saving potential. IHS says that intensified competition among LED lamp makers will help to drive down the prices for packaged LEDs. In about five years IHS predicts that the average selling price for packaged LEDs will be less than half of its current prices. The lower prices will result reduce the consumer payback period for LED lighting. While this will increase adoption, it will also result in declining profit margins for suppliers.
While LED lamp penetration is already significant in a number of lighting applications such as the retail and hospitality sectors, IHS forecasts that the residential sector will provide the largest opportunity for packaged LEDs. Packaged LED revenue in the residential sector will approximately triple to nearly $2.7 billion in 2016, up from an estimated $850 million in 2013, IHS says. Therefore, IHS says that manufacturers that carve out share early on in this market could garner significant returns during the market boom.