September 21, 2016
LEDs in demand but cost pressure rising
Strategies Unlimited lowers growth prediction for the LED market. Sales are expected to increase by 4.5 percent p.a. until 2020.
According to an assessment by the analysts from Strategies Unlimited, the market potential for LEDs remains strong. Only five percent of lights worldwide have switched to the power-saving light-emitting diode technology—almost 42 billion still have to be changed. Apart from energy efficiency aspects, demand is expected to increase also due to the potential of LED for smart, precisely controlled lighting. In building technology, street lighting, agriculture, the automotive industry and in imaging: light-emitting diodes are the key to smart, efficient lighting.
Accordingly, in its latest LED market report, Strategies Unlimited forecasts annual growth rates of 4.5 percent to 2020. LED technology will increase in the difficult lighting market, which will decline from 2018, and will account for 63 percent of sales by the end of the decade. Analysts predict 10 percent growth rates for interior and exterior lighting. Global sales in this area will almost double from USD 24 billion to USD 45.6 billion by 2020. However, prices will continue to fall due to surplus capacities worldwide. Increased demand for expensive networked LED systems will not change this trend, as this market segment will gather pace only slowly.
Surprisingly, the market for embedded LED systems—such as in automobiles, displays, mobile devices and advertising signs—declined by two percent in 2015. Strategies Unlimited had predicted 15 percent growth. But the massive price drop is putting a strain on the market. For example, prices for LEDs in the middle power range fell by up to 40 percent in the second half of 2015, while the market for high-power LEDs declined by 20 to 30 percent. The result: Smaller manufacturers are giving up. Takeovers and mergers are increasing. Despite consolidation, analysts expect the market to grow until 2020. But they have reduced their forecast from 8 percent to 4.5 percent per annum and also point out that there are major differences. While demand from the automotive industry will rise by 75 percent between 2015 and 2020, a decline is expected for displays and mobile devices. Advances in LED technology have reduced demand in the display industry. And in mobile devices, LEDs are losing market shares to OLEDs.