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Is LED Industry Evolving?

Lighting Systems Manufacturers:Are They Preventing The development Of The LED Lighting Industry?

LED technology, which changes the rules of the game, has fundamentally changed the competitive dynamics in the lighting market. So how do lighting manufacturers differentiate themselves and ensure success in such a challenging market?

The lighting industry arrived at a crossroads again. The progress in solid state lighting based on light-emitting diode (LED) technology has been breathtaking during the past ten years. The introduction of LEDs as a light source was a revolutionary event in the history of electric lighting. LED technology redefines the basic economics in lighting and brings in unprecedented application diversity. It not only creates a compelling value proposition for the user, but also extends the value chain of the industry. While LED lighting holds enormous opportunities for both the industry and market, the complexity of technology imposes great challenges that have fundamentally altered competitive dynamics.

The lighting industry has come to a crossroads again. It is the ultimate breath of cultivation grower in the simple state of the art for light emitting (LED) technology. The introduction of LEDs as a light feed was an event in the power electric tuning bench.
LED technology is redefining the economy in complement and can be extended economically. Not only is it challenging by creating a value definition for the user, it also expands the industry value chain. To create tremendous creative, designable dynamics for both industrial and market with LED lighting, also to grow bigger than the competition.

An Industry Dies Fast

Dutch conglomerate Philips, which started out as a light bulb manufacturer 120 years ago, left the lighting business in 2016 to expand its high-margin healthcare and hospital business. In 2018, independent Philips Lighting N.V. launched Signify N.V., marking a definitive break with its origins. was renamed.

General Electric is attempting to exit the consumer lighting business, which has played a vital role in shaping its identity in the past, and sold its commercial lighting division in 2019. Another "Big 3" player in the former lighting industry, Osram continues its transformation into a high-tech photonics company with the sale of its lamps and fixtures business. The most famous LED manufacturer, Cree, took away the lighting business in 2019, signaling that the company said goodbye to the lighting-centric direction.

Great lighting players chose rationality over pride and shunned the lighting business that was central to their historical roots. This happened right after LEDs became the main light source. The apparent reason is that it is extremely difficult to get a reasonable margin, but the underlying reason is that there are no signs of a growth spurt on the horizon. In the general lighting market, lighting manufacturers often have to compete over cost rather than differentiation. The conventional market was dominated by a few large companies that split the market by taking advantage of large-scale, capital-intensive operations and strong branding strength. But when LED lighting started, the competitive landscape completely changed.

LED lighting has an expanded industrial chain that includes the upstream production of semiconductor chips and packages; Medium production of LED modules, power supplies, lighting controls, heat sinks and optics; and sub-design and assembly of LED lamps and fixtures. The upstream sector has entry barriers in terms of R&D costs and equipment investment. Mid-range component suppliers save on scale benefits and/or know-how accumulated over a long period of time. Unlike the up and middle markets, which are saturated but the cuts of the markets are shared by a limited number of participants, the down market is extremely crowded. The wide and low-cost availability of lamp and luminaire components creates low barriers to entry, resulting in the entry of large numbers of "strangers". New entrants to the lighting industry bring new capacity and a desire to gain market share, but their capabilities are often limited by assembly operations and low vertical integration levels.

The additional but significant supply from new entrants leads to overproduction, which reduces the profits of market participants. Since most novice manufacturers do not have any financial burdens on overheads (eg product development, documentation), intellectual property (IP) protection and marketing, they can focus their resources on assembly processes and therefore have the ability to offer low-cost products. Intensifying cost competition is putting increasing pressure on already weak margins. When the existing business is unable to secure a critical source of finance to invest in new products and solutions, established players and large investors lose their enthusiasm for the lighting business.

So Who Is To Blame?

We can't put all the blame on lighting manufacturers who making low-cost assembly processes and dance around the edges of IP breach. The root cause of a sluggish industry can actually be attributed to the industry's difficulty in adapting to drastic technological changes. The traditional global dominance provided by large corporations was established in a market where there were changes in technology and application requirements. Interest groups, supported or influenced by a handful of leading companies, have established a monopoly on industrial policies, market access standards and technical requirements. Over the past few decades, the market has been freed from the monopoly of these companies. Lamps and fixtures used to be low value-added products. Still, the industry's giants were able to consistently get a good margin from such simple, low-tech products because the competition among the limited number of players was fairly bland.

LED technology, which changed the rules of the game, disrupted the competitive balance maintained by traditional industry giants. From the height of barriers to entry, we can predict the most important determinant of industry competition and industry profitability. When capital-intensive investment is no longer a requirement, technically simple lighting products naturally become starter products for novice manufacturers. In fact, the current turbulence in the lighting market can be partially attributed to the traditional industry giants and the interest groups that represent them. The low product standards they set for fluorescent lamps have far-reaching effects on LED lighting. Under their immense influence, regulatory authorities have turned a blind eye to the high flicker, poor color rendering, and biodegrading radiation of fluorescent lighting, which is never a problem with incandescent lighting. The transition from incandescent and halogen lamps to fluorescent lamps marked a major deterioration in light quality in the history of interior lighting.

While low barriers to entry have brought fierce competition in the LED lighting industry, the flawed, low-standard measurement system inherited from fluorescent lighting has put the industry in a particularly vicious circle. Legacy product standards can be easily met and tampered with, allowing LED lighting manufacturers to produce cheap, crappy products with minimal production costs. When LED technology took over the industry, industry giants and interest groups lifted a rock and dropped it on their feet. What triggers their exit from the sector with panic is their inability to control the situation. LEDs perform significantly differently from all legacy light sources and it has been a while since LEDs have become the light source of choice for general lighting applications. However, a standard measurement system has not been established to evaluate the product performance and light quality of LED lamps and fixtures. Market officials and industry bodies seem to have lost momentum to oversee the industry.

About LED Lamps

LED lighting products gained initial traction in the form of replacement lamps. The industry had high expectations for such applications as there are an estimated 40 billion sockets in the world. Offering product familiarity and usability similar to existing products has also encouraged rapid customer adoption of LED technology. But then, unfortunately, the bubble burst. Turning the low total cost of ownership (TCO) of LED lighting into a profit point in the consumer lighting market is difficult. For residential customers, energy savings over the life of the LED lamp are not as attractive as a low initial cost. LED lamps, including bulbs and tubes, are often designed in standard factors and offered in similar specifications. It is difficult for general consumers to distinguish the good from the bad by comparison. These variables make the purchasing decision very simple. On the other hand, substantial production capacity results in lamp manufacturers desperately selling commodified LED lamps at a razor-thin profit margin.

LED lamps are inherently a compromise between new technology and legacy product design. The roadmap of LED lamps will follow the path of traditional lamps. The LED lamp industry will merge with a small number of large manufacturers and a group of niche manufacturers.Lack of consumer awareness and lack of market education certainly contributes to this profit margin failure. However, the root cause lies in the disorder of the lighting industry. The absence of a meaningful rating system results in the inability to consistently compare the critical performance characteristics of LED lamps and luminaires. This allows LED lighting manufacturers to circumvent key performance metrics such as flicker control, lumen maintenance, color stability, spectral quality and driver reliability. As a result, you're compromising the quality of the construction materials to make up for losses in a tough market. The commodification of lighting technology is inevitably accompanied by low-cost designs that further degrade the quality of light. LEDs are current-powered, self-heating semiconductor devices. Poor product quality eventually leads to a negative consumer impression on LED lighting products.

And then?

The full potential of LED lighting can only be unlocked when a holistic approach is taken to effectively manage the thermal, electrical and optical properties of LEDs. LED lamps are essentially a redundant element in the LED lighting ecosystem, as their role as a light source is already filled by LED packages. It is a transition solution mainly used to renovate traditional lighting fixtures. The design of a high-performance LED lighting system is a multidimensional engineering effort that requires luminaire-level integration of LED packages, thermal management system, driver circuitry and optics. Lighting manufacturers should devote their efforts and resources to the luminaire market instead of the declining lamp market.

To avoid confusion, it may be useful to define "lamps" and luminaires here. A lamp is an assembly consisting of a base for receiving electrical power and all the necessary components to generate optical radiation. Lamps are made according to universal standards, which makes our work easier. Repair and replacement of lamps by other manufacturers is always possible. An LED lamp is usually an integrated assembly of LED packages, a driver circuit, a base, and other optical, electrical, thermal and mechanical components. Examples of LED lamps include A19 bulbs, GU10 bulbs, and T8 tubes. A luminaire or a luminaire refers to a complete lighting system designed and built around light sources (bulbs, tubes, LEDs). an integrated LED fixture using LED lamps (bulbs or tubes) as the light source, an LED assembly or LED modules, a compatible driver and heat dissipation, environmental protection and mechanical support, and optics to control the dispersion of emitted light. The integrated design allows the LEDs to be powered by the full featured driver circuit and thermally managed by a robust system that uses the luminaire housing as a heat sink.

The use of LEDs as a light source also adds flexibility to the luminaire design in terms of physical appearance and light distribution. Conventional light sources have distinctive operational properties and optical performances. They are limited to serving related applications, eg. halogen and fluorescent lamps for commercial and residential lighting, metal halide lamps for high ceiling and sports lighting, high pleasure sodium lamps for road lighting. In contrast, LEDs are a universally applicable light source. From residential, commercial, industrial, retail, institutional, hospitality and office lighting to architectural, landscape, sports, road and street lighting, there is an almost endless range of lighting applications that can find the footprint of LEDs. Even in the general lighting market, the stage for ambitious lighting manufacturers is as limitless as the limit of LED applications. And now, it breathes new life into this stagnant industry. So the problem is that many industry participants adhere to established ways of thinking.

We Have The Solution

Due to the excess capacity in production, the commodification of LED technology is experienced not only in the lamp market, but also in the luminaire market. Since the lamp business has dwindled, excess capacity has been shifted to luminaire production. Manufacturing was easy for assembly suppliers due to the ease of purchase and cost competitiveness of off-the-shelf power supplies, optics, heat sinks, enclosures and enclosures. As can be expected, those interested in this assembly business continue to compete head-to-head in the fixture market. Obviously, this is not a sustainable business.

All the dynamics of the lighting market are in rapid evolution. No one should have the illusion of survival with low value-added assembly work. It's moving towards things to value, systems, solutions, and services. The combination of both lighting systems and lighting applications is starting to become more complex as lighting solutions are increasingly needed to deliver value beyond light. Integration power is today's leading success factor: the integration of LED packages into a lighting product, the integration of luminaires into a lighting project, and the integration of new values ​​and features into a lighting solution. Commercial, industrial and government customers are increasingly looking to purchase an integrated solution. This is not as simple as presenting a wide portfolio of luminaires. The ability to create customizable and application-centric solutions will become more critical. Additionally, equipping the workforce with local and customer-specific expertise will be key to developing new value propositions for buyers.

In a rapidly changing industry, an important source of competitive advantage is concentration. Lighting manufacturers must shift from a mindset that offers a large portfolio of products with no major advantages to one that offers a niche category of highly competitive products. Lighting manufacturers serving vertical markets should shift their focus from selling products to providing integrated lighting solutions. While a relentless focus on cost optimization is necessary, it is crucial to identify key differentiators that appeal to a target market or customer. A manufacturer's reputation and brand image depend on the differentiators it offers. Differentiation can be created through unique designs with impressive aesthetics, superior technical features, value-added features and/or professional services. All these differentiators require multidimensional integration.

High quality material production and sustainable performance of a lighting system are the prerequisites for successful lighting design. Lighting manufacturers must direct their research and development to meet this standard. As lighting technology manufacturers, we should not compromise on the quality of the light in order to save costs.

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