The market for light-emitting diode (LED) luminaries, also known as optimized permanent light fixtures, is projected to grow 12-fold over the next decade, according to Lux Research. From a market size of $2 billion, LED substrate lighting is forecasted to grow to $25 billion by 2023, with a compound annual growth rate of 25%.
Using historical trends and projected average price reductions, Lux research built a model that computes the adoption rate of LED substrates within each end market application such as office, street, and industrial lighting. The model showed that recessed modular will emerge as the largest LED luminaire market, replacing incumbents such as fluorescent to grow from $1.5 billion in 2013 to $14.5 billion in 2023.
According to Christopher Hwang, Lux Research Associate, the cost structure of LED luminaries will shift as LED packages rapidly improve in efficiency and decrease in cost. This will also result in new opportunities in other components such as secondary optics and drivers. This trend will influence the adoption of emerging technologies such as high-CRI LEDs in recessed modular, high-bay, alternating current LEDs, and roadway luminaries.
Analysts from Lux Research identified the largest opportunities for investors, component suppliers, and technology developers within the luminaire market. Lux Research found that LED package costs will eventually be driven down by increasing efficiencies. Improved efficiency and increased manufacturing yields and utilization will lead to decreasing LED substrate package costs, projecting a reduction of over 80% to less than $4/klm. This in turn will lead to a 35% decrease in the bill of materials (BOM) of a standard 3,500 lumen recessed modular luminaire, from $85 in 2013 to $55 in 2023.
High-CRI luminaires are projected to remain a niche product even by 2023 and will find adoption in high-power applications, in contrast to alternating current LED substrate-based luminaires that are projected to provide a technology advantage only in low-power applications, such as recessed modular luminaires. Finally, there is a huge opportunity for LED substrates in the optics and drivers market. It is forecasted that the secondary optics market will be the single biggest growth opportunity in components and will be valued at $6.9 billion in 2023, while the drivers market is forecast to grow to $4.9 billion by that year.
The projected growth of the LED market is further heralded by a new Digitimes Research report, which notes that the Chinese government has earmarked a $164 billion production target for all LED substrate products by 2020, with 70 percent of the 2020 goal to come from LED lighting alone. This 2020 target is double the amount established for 2015, as part of China`s 12th national Five-Year plan. The report says that the growth in China`s LED sector is driven by two factors: an expected population growth in urban areas and increasing growth in the country transportation infrastructure.
The number of people living in the large urban areas of China is expected to increase from 52.4% of the population in 2012 to 60% by 2020. This will drive up the demand for both indoor and outdoor LED products. Meanwhile, the transportation infrastructure of the country is already growing rapidly as China expects to add more to its railway, subway and intercity freeway systems by 2015.
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