LED Lighting Market Consolidation Will Continue, According to Navigant Research

The lighting industry is in the early stages of shifting away from established technologies – fluorescent, incandescent, and high-intensity discharge (HID) lighting – toward light-emitting diodes (LEDs). Adoption rates of LED lighting are expected to grow in the coming years as the efficacy and quality of LEDs surpass those of competing technologies and as prices fall to enable reasonable payback periods. According to a new research brief from Navigant Research, however, the total number of vendors involved in the LED supply chain will shrink over the remainder of this decade.

“Driven by a desire for vertical integration among the larger lighting companies – fueled, in turn, by the relentless demand for lower prices and higher quality – consolidation in this sector is likely to continue,” says Jesse Foote, research analyst with Navigant Research. “Other factors, including the expiration of existing patents, new interchangeability standards, new technologies, and an expected upsurge in creative product designs, will create opportunities for new entrants at each level of the supply chain.”

The first step in the manufacture of LEDs is an ultra-thin substrate onto which a layer of gallium nitride (GaN) is deposited. This is a highly technical and exacting process. While LED manufacturers in China have attempted to master this process, they have had only limited success with the high-quality wafers needed for the high lumen output LEDs used for lighting, according to the report. The market is led by U.S., German, Japanese, and Taiwanese companies such as Cree, OSRAM, Nichia, and Epistar.

The report, “LED Supply Chain Dynamics”, examines the specific trends that affect the manufacture of the primary components of an LED light, as well as the broad trends reshaping the industry. Regional influences and applicable international standards are detailed, and an industry map shows how some of the larger vendors fit within the supply chain. Recommendations for how industry players can best take advantage of the global opportunity presented by the shift toward LED lighting are also included in the report. An Executive Summary of the report is available for free download on the Navigant Research website.

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Drew is a regular contributor covering trending topics.