Kevin Parmenter, Contributing Editor
In my career I have seen few things go from emerging to a sea change as fast as the LED lighting market. LED lighting has gone from emerging technology to mainstream commodity very rapidly, and there are yet few standards. Every application usually needs something different, as every customer wants something a bit unique and they change their minds often. In reality this “new” tech started as a commodity market from the beginning.
Incandescent and fluorescent lighting have had costs pounded out of them with a big stick for decades, so it was actually inevitable that the florescent electronic ballast “tar in a tuna can” was what an LED lighting power supply was going to end up looking like in short order – which has in fact occurred. It seems that the lighting market is following the model of the solar panel market, in that despite the CAGR of over 25 % overall, it’s going to be very hard to differentiate yourself making certain power supplies, as this market is now flooded with below-cost third-party products.
Customers often call for applications questions, then end up buying from “lucky happy shiny golden dragon Shenzhen trading company LTD" for below cost after consuming hours of your time. So who is going to make money on this 25% CAGR growth market? I project that the attributes of the market are going to dictate that you have to have two things at the same time. That is, you have to have the best technology and be the lowest cost producer simultaneously while coming out with a stream of new products rapidly – like the cell phone market. This means that the consumer electronics companies will likely be the winners here.
Semiconductors and lighting
It may be possible for semiconductor companies to make money here, but if you are not good at selling highly differentiated products to consumer electronics applications you will want to re-think it. I recently saw a demo of a system which will be put into service in retail establishments, whereby the consumer walking around a store can download an application and the system communicates through modulating the LED lighting system in the building and the consumers phone can print out a coupon for a product close to where the customer is physically located – communications all by modulating the LED lights.
Additional opportunities exist in DC power systems where large bulk power systems are then modulated as part of a building control system with distributed DC lighting connected to part of the internet of things – this will be an area where the services are worth more than the product. The future of the "non-communications enabled” disposable “tar in the tuna can” basic power supply is already race to bottom and watch for it to get worse.
My bet is on the consumer electronics companies to take over much of this market – they are already well positioned for it. It’s going to be brutal for the remaining players in the traditional non-valued added “dumb” power supplies – think DVD players, TV’s and cell phones. If you can survive that you can likely survive the commodity general LED lighting power market – survival of the fittest. Either double down move up the food chain if you think you have what it takes or run for cover and move out.