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LED lighting market growth to shrink in next five years?

LED lighting market growth to shrink in next five years?

By Srabani Sen, BizLED Bureau

Nov 30, 2015: LED lighting has become quite popular worldover, yet industry experts speculate its growth to shrink in the next five years. Most of the countries have realized its benefits and are taking several initiatives to make it a household name. However, to make it a mass movement, industry experts feel that the prices of LED lighting products should come down even more. Governments are, therefore, making appeals to the manufacturers to cut down production prices to bring down the prices of LED lighting products and make it more affordable.

According to an industry estimate, the global LED lighting market will reach US$25.7 billion in 2015 and further expand to US$30.5 billion in 2016. The penetration rate of LED lighting will increase by 31% in 2015, which will increase to 36% in 2016.

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Although high demands for LED lighting spurred the volume of its usage and increased the growth of the market in 2015, which will continue in 2016 as well, industry experts fear that the high priced LEDs and the neck deep competition in the global LED lighting market will see its growth shrink in the next five years. Ironically, the increasingly energy efficient LEDs will see a dip in its usage volume in the next five years if the prices do not dip further. As a result, manufacturers are under immense pressure to further lower the prices of LEDs. Research firms project that in the next five years, the LED industry?s compound annual growth rate (CAGR) will not increase by more than 10%.

Less scope for further price cuts

The demand for LED lighting fell short of expectations in 2015 because during the second half of 2015, LED chip and LED package prices dipped sharply, leading to losses incurred by many manufacturers. Manufacturers are immensely under pressure to lower the prices of LED production to bring down the prices further. However, LED market analysts point out that in the long run, there will be limited scope for further price cuts. Manufacturers would, therefore, need to look for other cost reducing solutions. Besides lowering LED chip prices, manufacturers would require to evaluate cutting down prices of components like LED drivers, and that of designing the products and the components.

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Manufacturers across the globe are also demanding that their governments should follow China?s LED policy, which provides high rate of subsidies to the LED manufacturers leading them to cut prices of LED productions. With the support of the Chinese government, the local LED industry has become the world?s largest LED lighting manufacturing hub.

In 2015, manufacturers were also hit by currency fluctuations. As a result, demands for LED lighting products in different countries have been much lower than expected. To add to this woe, LED prices continued to slide in 2015. Consequently, many small and medium enterprises (SMEs) in the LED industry have been faced with financial losses, and were faced with negative cash flow. Industry analysts believe that if this trend continues many smaller manufacturers will be ousted from the LED industry. They also predict that the next bankruptcy wave in the LED industry will be most evident before the Chinese Lunar New Year.

LED lighting manufacturers have also started shifting their focus to professional lighting markets with tremendous growth potentials like commercial lighting, industrial lighting, architectural lighting, and automotive lighting. They have pinned their hope on the increase in government spending, especially in new public projects. They believe that new government projects will create new opportunities and help in faster penetration of LED lighting.

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