LED market for indoor residential lighting poised to surge

November 27, 2012 - LEDs have struggled to gain a foothold in the marketplace for indoor lighting applications, but technology improvements and supportive legislation are gathering momentum to help push LED adoption for residential buildings — the largest lighting application sector.

Global sales of LEDs for lighting applications totaled $3.57B in 2011, and should surge to $23.24B by 2018, calculates Frost & Sullivan. Behind that swell is "legislation that will essentially phase out incandescent lighting and other inefficient lighting technologies," as well as declining prices for LEDs that will boost demand and penetration of LED technology across multiple lighting applications, explains Frost & Sullivan industry analyst Hammam Ahmed.

The European Union has been an early adopter of legislation supporting a shift away from both manufacturing and sales of incandescent lighting; this legislation, though coming in multiple phases, has been echoed with similar policies sprouting up and implemented in various other countries (US, Switzerland, Canada, Australia). In Asia, Japan, China, Taiwan, and Korea are adopting LED-supportive legislation including financial incentives for both consumers and manufacturers.

Total global LED lighting market (2011), percent LED revenue by region (left)
and application (right). All figures are rounded. (Source: Frost & Sullivan)

Key factors limiting LED penetration into general lighting applications are pricing and technology improvements, but sharp and continued price declines should speed up the tipping point of price parity with other lighting technologies by the end of this decade, Frost & Sullivan says.

On the other side of that coin, manufacturers continue to improve lumens/dollar by pushing R&D and improvements in brightness, design, and quality of components, Hammam notes — though he admits "it remains to be seen how customers receive these new product developments." Additionally, those same relentless price declines are forcing manufacturers to come up with sustainable, long-term growth plans. "Participants from Eastern Asia, who have the ability to compete on prices, need to address quality issues to expand into the more developed markets of North America and Europe," he noted, while current market leaders "need to offer high-quality products and explore avenues for reducing cost of production."

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