Smart Lighting Has Huge Added Value, Opening Up Growth Space for the LED Industry

From recent market trends, smart lighting has become a new product actively promoted by manufacturers such as Philips. At the Frankfurt exhibition earlier this year and the recently concluded Guangzhou Lighting Exhibition, smart lighting was also a hot topic of discussion. The market is currently in its nascent stage, and manufacturers will intensify their promotion efforts. The market is expected to enter a rapid development period in the next 1~2 years.

　　Huge Added Value

The essence of smart lighting is electronicization and networking. It can not only achieve intelligent control of lighting systems and realize the basic functions of automatic adjustment and scene lighting, but also serve as an entry point to the Internet, thereby deriving more high value-added services, such as health management, map positioning, shopping guidance and advertising, etc.

It can be foreseen that the ecology of the lighting industry will undergo major changes. Smart lighting falls within the scope of smart homes, and its development requires the cooperation of the entire industry chain, which will lead to significant changes in the industry ecology in the future. Industrial integration based on specialized production will be the development direction of smart lighting in the future. Specialized production is the survival foundation of luminaire manufacturers and controller vendors, while system integrators and platform operators will have a greater voice in the industry. Meanwhile, it is highly likely that lighting manufacturers will increase cooperation with Internet companies.

Regarding the sustainability of growth in the LED industry, market debates mainly come from the following points: 1) How long can the replacement market support the rapid development of the industry? 2) Is the lifespan of LED luminaires very long? 3) After the rapid replacement period, where will the growth momentum of the industry come from?

Regarding the first question, data from the U.S. Department of Energy shows that the penetration rate of LED lighting in the U.S. market in 2013 was still less than 5%. Assuming the penetration rate doubles each year, replacement demand can last 3~4 years. As for the lifespan of LED lighting, during the rapid development period of LED lighting, long lifespan is not the most concerned factor for manufacturers, but rather minimizing costs under the premise of meeting lifespan standards (20,000~30,000 hours). Moreover, after the industry matures, manufacturers will spare no effort to push product lifespan to the extreme.

Finally, LED smart lighting will increase the average selling price (ASP) and added value of products, and its development space is far greater than that of traditional lighting products. The source of long-term growth momentum after the rapid replacement period is thus resolved.

According to market research, the cost of an LED driver power supply with intelligent control function generally does not exceed 10 yuan. However, the ex-factory price of lighting fixtures equipped with such power supplies is 20%~30% higher than that of ordinary fixtures. This intelligent configuration alone can add at least a 20% premium to ordinary lighting products (and this is without considering additional more complex systems and higher-end configurations).

According to estimates, without considering high value-added products, the smart lighting industry alone will provide at least 60 billion yuan of additional market space during the two years 2014–2015. Calculated at a 30% compound annual growth rate, the conservative estimate is that this figure will reach nearly 80 billion yuan by 2018, with a cumulative total exceeding 200 billion yuan over 5 years.