LED Lighting’s Inflection Point
It’s easy to look back at the advent of the Internet or of cell phones and see when prices, market demand and technology improvements converged to make the switch from analog to digital a no-brainer. But forecasting this inflection point ahead of your competitors is what drives success in any business faced with new digital technology.
Today LED lighting is on the cusp of its own inflection point. Digital LED lighting technology is improving at an exponential pace, and prices are coming down just as fast. Like a surfer paddling with a wave to catch it as it crests, the lighting industry is reaching the peak of its own switch from analog to digital and LED technology is set to revolutionize lighting as we know it. Those who are ready for the wave will catch it, while others risk being caught in the undertow.
Digital Darwinism
First it was transistors, then cameras, communications, music, motion pictures and televisions all followed. Each industry evolved from its analog roots into its digital future and was reinvented along the way to deliver radically new performance at new price points, from new companies, into new markets.
The conversion was complicated by changes in form and function that continually shifted as the new digital technology evolved. Further, markets often re-segmentated and realigned in response to the new value points provided by digital technologies. This churn made it very difficult to determine the right moment to enter the market, with which product, and what functionality. Some companies were prepared and survived; others failed to read the signs.
Though it was invented in 1965, LED lighting today is improving at exponential rates. Technologies like this can be deceiving, because for a long time there seemed to be little change. Then, once it reaches its inflection point, the technology “explodes” and rapid transformation enables a major disruption in the market. We are now very close to, or just reaching, the inflection point for LED lighting.
Since 2011 alone, the industry has seen a 25-30% drop in prices, due to both LED technology improvements and economies of scale. While LED light fixtures are still often four times the cost of the incumbent fluorescent technology, in the near future they will be only twice the cost or less. With this fast pace of change, companies not on the crest of the wave now, will have to wait for the next one.
According to McKinsey & Company’s 2011 report Lighting the Way: Perspectives on the Global Lighting Market, the global LED lighting market is expected to reach 40% as early as 2016 and 60% by 2020. Put another way, by 2020 LED lighting will control the majority of the global lighting market. As we pass through the inflection point, it will soon be clear to all (not just today’s leaders) that LED lighting will take over as the technology of choice for all lighting applications.
At the LED inflection point, the lighting industry will see rapid commercial adoption of LEDs in multiple vertical markets. Continuous improvement in LED technology will cause many of the forms and functions of lighting products to fundamentally change. Moving from the single light bulb of the past to the mult-point sources of LED means many more design solutions are possible for a given illumination requirement and form factor. Some of these will be widely adopted, while others will fall away in the real-time battle for market dominance.
New value points for various lighting markets will also be influenced by LEDs. Who will find the right combination, the right design, the right function at the right price? Nobody remembers the first manufacturer of an MP3 player, Eiger Labs, but everyone knows who got it right, Apple.
Digital synergy
Topping the list of new value points from the LED revolution is energy efficiency. The digital nature of LEDs means controls and sensors add an infinite new range of potential value points that are synergistic with LED’s digital and low-voltage nature. Controls and sensors will increasingly be embedded within the LED fixture and connect to a building, or groups of buildings. These embedded controls could pave the way for “smart buildings,” long before the smart grid reaches prominence.
The value of low to zero maintenance and lifetimes over 200,000 hours will also emerge as the technology continues to improve. For a 40-hour work week, 200,000 hours equates to roughly 96 years, which is unimaginable with traditional technologies. How will extreme lifetimes be valued by the market and at what cost? Will there be a cost? The opportunity is now for industry leaders with the right vision to explore, market and hopefully capitalize on this value.
The LED inflection point holds much potential for economic growth and wealth creation within the lighting industry. But while the technology is new, the markets are traditional…for now.
After the expanded capabilities of the new technologies are accepted, new markets and new channels will be revealed. New companies will thrive selling lighting as a service or lighting as a controls platform for smart buildings. On the other hand, the large bulb manufacturers may have to scramble to find new sources of revenue. Additionally, with the price of long-life, high-performance lighting rapidly dropping, what was once an expensive, spec-grade light fixture may quickly become the low-cost entry point.
This rapid move down-market is a characteristic of exponential technologies like LED. Companies that survive will be the ones who continue to innovate at the high end and then move product downstream toward the mass market. This concept is new to the lighting world and those companies who specialize only in high-end fixtures are at great risk of being left behind.
From this point forward we expect to see rapid development and deployment of LED lighting technology in an expanding range of applications. Competition will push all of us to ever-greater advancements, and the industry will deliver significant efficiency in energy usage globally.
As we pass through the inflection point of LED lighting, there will be winners and losers. Those who embrace the speed of digital growth early, and take skillful advantage of the opportunities provided, will be better positioned to grow their market presence when the exponential goes vertical and lighting is forever changed by LED.
Written by Jeff Bisberg, Co-Founder & CEO of Albeo Technologies. Based in Boulder, Colorado, Albeo Technologies is a leading LED manufacturer with over 8 million square-feet of space lit by its commercial and industrial LED fixtures. Bisberg has 25 years of experience in developing and marketing innovative solid state technologies, and holds over 25 published papers, patents, and standards in the field of electro-optics. He serves on the board of the Colorado CleanTech Industrial Association, and University of Colorado Leeds School of Business Deming Center for Entrepreneurship. He was honored in 2010 and 2012 as a finalist for the Ernst and Young Entrepreneur of the Year.