Today the most important driver for Lighting Controls is the increasing penetration of LED Lighting. Various authorities have estimated that between 2014 and 2023, the global share of LED lamps is expected to rise from 15% to 75%. Over the same period the market value is expected to fall by 30% due to falling prices and longer product lifespan.
This, as our new report shows, will have a knock on impact on lighting controls. However lighting controls have the opportunity to more than negate these consequences through additional software, connectivity, and value added services.
In our 2013 report on the lighting controls business we showed that the whole lighting industry was in the throes of disruptive technological changes; not only in the development of light sources but also the influence of new control opportunities and the concept of the ‘Internet of Things’.
The last two years have only served to confirm this direction and the impact it is having on whole of the lighting industry. When any industry changes as rapidly, and as much, as this there are significant impacts on the businesses involved.
The key areas of change that are influencing the market and making it necessary to redefine business models are:
- The development of LED light sources including the introduction of low and medium power devices, chip-on-board packaging and the inclusion of integrated silicon with increasing levels control functionality.
- The increasing influence of the Internet and its possibilities for both control and data gathering.
- The introduction of practical wireless technologies that reduce installation costs.
- The ability of LED lighting to carry, and transmit, high bandwidth, data and signals.
- LED lighting allows the introduction of new control strategies that were not feasible with conventional lighting solutions.
- The extension of control and monitoring functions to ‘location based services’ and the possibility of offering ‘light as a service’.
- The use of a lighting installation to gather data to share with the rest of the building services systems as well as the business enterprise.
- Unrealised potential of retrofit projects in existing lighting installations.
- Environmental: The continuing worldwide pursuit of energy efficiency and CO2 reduction, in the built environment.
- An increasing recognition of the potential benefits of better lighting in the workplace.
- Price erosion in the LED lighting market brought about by increased volume and capacity.
- The potential to add value through the offer of increased functionality for lighting.
- Convergence between building automation and IT structures, and the blurring of the boundaries between facilities management and the business enterprise.
The above changes in the industry are having a direct impact on the strategic direction of all existing lighting controls businesses as well as opening up the potential for new entrants and innovative partnerships.
The changes to business models that have been made since 2013 have moved on to expand more broadly into the smart building space. Finding new ways to integrate an intelligent platform 'out of the box' is one way to expand reach and to operate with the other services and controls in buildings. Since then we have identified some 12 joint ventures and strategic alliances arrangements that fall within this orbit.
[contact-form-7 id="3204" title="memoori-newsletter"]
Merger and Acquisition has also played a significant role in the strategic development of lighting companies despite the fact that activity has declined since 2008 and in particular in the LED Lighting business. In the Lighting Controls business the fall has been less steep and as we have seen above there has been a preference to form strategic alliances rather than merger and acquisition.
Opening up the substantial, latent potential for selling lighting controls into the existing building market will require a major marketing and sales effort initially. This will then need to be supported by the availability of suitable products that are priced correctly and straightforward to install. The relation between overall cost and the available savings must meet the ROI expectations of the market.
Developments in wireless technology, and evidence that it is both reliable, and easy to use will deliver the solution. Above all the retrofit market requires the sales and marketing efforts to be directed at building owners and users, rather than those responsible for designing and constructing them. There is a clear divergence already between the routes to market for the new construction and retrofit lighting controls business; greater understanding of this situation will be required if success is to be achieved here.