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In the 2011 film “We Need to Talk About Kevin”, the mother of Kevin struggles to come to terms with her problem son. Does the Lighting industry also need to come to terms with its own problem child, LEDs?!

At the recent Strategies in Light Conference in California, Jed Dorsheimer (acknowledged as one of the 10 most influential people in lighting) warned the audience that the sector is at a crucial junction – and must rapidly embrace change if it is to survive with historic levels of profitability.

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He said the traditional lighting business was ‘going the way of the dinosaurs’ as the elimination of the replacement market and the rapid commodification of LEDs drove down prices. It was becoming increasingly difficult for investors to see good returns.

The Lighting manufacturers have acknowledged for at least the last two years that the “cheaper-lumens business model” doesn’t work well for them and at least three of the world’s leading suppliers are heading for the exit door. The Chinese manufacturers with the backing of their government are buying up the excess LED production and when they are ready, prices will go up and profitability will be restored for them and those that weathered the storm. We are not suggesting that the strategy should be to just sit tight and hope for the best, but where is the opening for manufacturers to replace their traditional business with another as large?

Jed Dorsheimer pointed to applications in building lighting management, visible light communication, horticulture and water purification as niches in which good margins could be made. However with the exception of bus based lighting control it will be some time before these markets develop. They will at best be niche markets for the next ten years.

In the meantime there is still an abundant latent demand for retrofitting LED lighting and bus based lighting controls and we predict that the latter will grow by a CAGR of 10.6% until the year 2020. However its size at $2.183 billion in 2015 is a mere fraction of the total lighting business in commercial buildings.

The LED revolution is now in full swing. Solid-state lighting is displacing traditional illumination sources across every part of the global lighting market. Over the next few years, billions of sockets will be in play and the race to connect them will be on. These networks will give access to power every socket and make intelligent lights a perfect platform to deliver the Building Internet of Things (BIoT). As we show in one of our latest report, IP networked lighting controls will become the stratagem for BIoT.

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Over the past few years, a new generation of connected lighting vendors has emerged (including Digital Lumens, Daintree Networks and Enlighted etc.) and they have established a strong position in a networked, software-focused view of where lighting is headed. The traditional lighting players such as Philips, GE and some major conglomerates from the Building Energy Management business such as Honeywell Schneider and Siemens are also now in position.

So while general traditional lighting is going to gradually become extinct a new business is now being born. lighting companies are in a position to take a leading role in delivering the central nervous system of every smart building.

For more details on the reports mentioned in this article, visit http://memoori.com/portfolio/smart-buildings-the-lighting-controls-business-2015-to-2020/ and http://memoori.com/portfolio/transformation-BAS-to-BIoT-2015-2020/