Market Dynamics
Drivers: awareness of energy savings soaring global market:
As the industrial output is increasing rapidly across multiple regions, the reliance on electricity has also been growing. Also, the manufacturers are often challenged with huge operational costs. This is one of the major driving factors compelling manufacturers to adopt energy-efficient lighting solutions. For instance, according to the data released by EIA, around 32.78 quadrillions BTU of total energy was consumed by the industrial sector in the United States in 2019. Lighting forms a significant portion of their electricity expenses, which soon became the focus for manufacturers and governments across regions, as they were under pressure to decrease carbon emissions from electricity generation. Lighting accounts for a significant share of the total electricity consumption and total greenhouse gas emissions globally. As a result, the increasing need for energy-saving has compelled industrial users to invest more in energy-efficient lighting technologies.
Governing bodies and regulatory institutions are also responsible for increasing awareness of energy savings through public awareness campaigns and lighting evaluation groups. The US Department of Energy’s (DOE) Solid-state Lighting (SSL) program is an example. As reported by the US DOE, these activities have resulted in the transition toward more energy-efficient lighting technologies and have contributed to the substantial rise in the penetration of LED lighting solutions. Technological improvements and market acceptance have resulted in improved efficiency in LEDs. Therefore, the fluorescents and the high-intensity discharge (HID) lighting solutions are gradually starting to phase out.
Drivers: adoption of led by various industries surging market growth
The lightning vendors are constantly investing in improving the efficiency of the lighting systems and rolling out new solutions across various categories such as flood, area, emergency, hazardous, non-hazardous, etc. In addition to new industrial setups, LEDs have paved their way beyond the existing establishments. Companies across multiple regions have increasingly started to replace end-of-life lightning products with the available energy-efficient solutions instead of completely changing their lighting solutions. In recent years, the LED industry is witnessing massive investments from several companies. This primarily has led to the emergence of innovative LED technologies that are more affordable.
LED-based lighting is anticipated to be the future of lighting, with various companies investing in the technology. The improvements in technology have helped to reduce the production cost while improving the efficiency and operational lifetime of LEDs. These are the factors leading to severe competition between the LED lighting manufacturers, resulting in a dramatic price drop of LED lighting products in the past few years. LED lights are up to 80% more efficient than traditional lighting solutions, like fluorescent and incandescent lights. About 95% of the energy in LEDs is converted into light, and only 5% is wasted as heat, which is the reason the end-users are increasingly adopting this more efficient form of lighting.
In addition to the awareness programs, governments across regions have also contributed to the market growth through various incentives and regulatory frameworks. For instance, production-intensive regions, such as China and Japan, have pledged energy efficiency since the economic reform. Since then, these countries have faced challenges while balancing their economic growth, which they attempted to streamline by bringing up energy reforms. The Chinese government has been encouraging green technologies in all areas of manufacturing and promoting efficient lighting technologies to reduce power consumption.
Restraints: high cost of implementation hampering market
The initial cost required to integrate or replace the existing lighting system in manufacturing plants and production facilities across the globe is very high, especially for the small and medium industries. Traditionally, certain end-users prefer compact fluorescent lamps (CFL), LFL, and HIDs over new and emerging LEDs, as they have a comparatively lower cost. Additionally, the lack of expertise or knowledge in the maintenance of newer technologies also prevents organizations from integrating LEDs into their manufacturing facilities. The assembly process for an LED is a complex procedure. Further, there has been an influx of new local manufacturers into the market, with the proliferation of LED technology across the industrial lighting sector has also impacted the purchase decision of the users.
Although the costs have significantly reduced over the last few years, certain challenges persist. Since the LED lights for industrial purposes are available at a much lower price, local manufacturers are receiving lower margins, which brings intense competition from Chinese players, who are offering lighting solutions at a much lower price. However, according to Eaton, multiple industrial luminaires from new and local manufacturers are falling below the safety and performance standards. The company has also been involved in regular purchasing and in testing competitor products. The company has reported that more than 30% of the imported luminaires failed to comply with the safety requirements set out in the EU Low Voltage Directive.
What are future key opportunities in industrial lighting market?
Increasing demand and government initiatives boosting opportunities
The emergence of LED technology has been modifying the basic economics in the lighting sector and brought diversity in application. LEDs have created a compelling value proposition for the end-users and extended the value chain of the industry. The complexity of this technology also imposes certain challenges that are fundamentally altering the competitive dynamics, while LED lighting holds significant opportunities for both the industry and the market. Moreover, during the United Nations Framework Convention on Climate Change held in Paris, multiple countries such as India pledged to cut off their carbon emissions intensity by 33-35% by 2030. In order to acknowledge this pledge, the government has been undertaking initiatives to promote the usage of LED products in the country. These types of initiatives are predicted to offer various opportunities to the vendors operating in the market. Further, multiple regions such as Asia-Pacific and North America have been witnessing an increasing demand for retail and e-commerce sales which provides significant opportunities for the industrial lighting market players primarily due to the growing number of warehouses being opened in these regions.
LEDs are noticed to gain importance as a viable option for hazardous locations, as users can realize the importance of low maintenance and the associated costs. Encapsulation technology is gaining popularity, though it is new to hazardous location-rated lighting. Many manufacturers are expected to leverage the opportunity to use encapsulation-based protection, mainly due to the inherent solid-state technology. Further, this approach significantly improves conventional flame-proofing in terms of factors like product cost, energy efficiency, performance, fixture weight and construction, and protection from damage. For instance, Dialight had previously launched its new line of Vigilant and SafeSite Low Profile/Top Conduit LED Linear fixtures, with better performance and lifespan than the traditional T-5 fluorescents. It is suitable in harsh conditions, including upstream and downstream oil and gas, petrochemical, and heavy manufacturing applications. In May 2020, the company announced the availability of newer upgrades to its Vigilant and SafeSite Area Light. These new universal mounting adapters sold as an accessory enabled great stock flexibility. They offer ease of installation and significant time and cost savings. The distributors and customers can configure stock on-site using these UMA with the base Area Light model.
Regional Analysis
Asia-pacific to be the largest revenue holder in global market
Based on region, the global industrial lighting market is segmented into North America, Europe, Asia-Pacific, Latin America, and Middle-East & Africa.
Asia-Pacific is anticipated to hold the largest market share of USD 4591 million by 2030 at a CAGR 6% during the forecast period. The market in Asia-Pacific was valued at USD 2672 million in 2021. The Asia-Pacific region is predicted to witness massive deployment over the forecast period, owing to the increasing need for energy-efficient lighting technologies across industrial applications and infrastructural development in the region. In line with its coal-to-gas switching policy, this deployment coincides with the rising demand for LNG in Asia-Pacific, which may increase the demand for lighting in industrial locations in the oil and gas industry. The e-commerce market in this region is the global leader. With a majority of the customers in urban areas and delivery speed a growing priority, prominent online retailers are increasingly opening distribution centers in the urban areas in order to complement the larger out-of-town centers. This increased the launch of multiple new warehouses in the region, which is expected to present an opportunity to the players operating in this region.
Europe is the second contributor to the industrial lighting market with revenue of USD 1729 million in 2021. The increasing government policies across major geographies are also boosting the growth of the market. For example, the European Union's policy measures banned the sales of inefficient lighting technologies for several years. The region also banned the sales of non-directional halogen lamps. These kinds of policy measures allow industrial consumers to gradually replace their traditional lighting products with LED technology-based products.
The industrial lighting market in North America is observed to have increasingly participated in multiple launches to upgrade their existing LED lighting offerings for hazardous locations. With e-commerce growing significantly, the number of warehouses is also expected to increase in order to cater to this rising demand. The oil sector is expected to invest significantly in advanced safety features and smart lighting solutions in order to ensure that there are no disruptions in the upstream and downstream processes. The market value was USD 1525 million in 2021.
Latin America and Middle East & Africa have the lowest market. In 2021, the market revenue in Latin America was valued at USD 144 million. The market value of Middle East & Africa was USD 237 million in 2021. The government’s changing policies and the COVID-19 are hampering the industrial lighting market growth.
Segmental Analysis
The global industrial lighting market share is categorized by light source, product type, and end-user applications.
Based on the types of light source used, fluorescent light is the major shareholder in the global market. The fluorescent segment was valued at USD 3927 million in 2021. The fluorescent segment is projected to generate USD 5836 million in 2030 and grow at a CAGR of 5% by 2030. For several decades, the most common lighting fixtures in commercial and industrial settings have been fluorescent.
Based on the product, the market for industrial lighting market is segmented into high/low bay light and flood/area light. High/low light is the highest market shareholder and was valued at USD 3999 million in 2021. This segment has experienced an inclination toward LED fixtures, owing to its capability to distribute light effectively. Due to the multi-point design approach, LED high bay lighting applications often provide an evenly distributed light. LED Low bay lights are designed to provide quality color render and crisp, white light for low ceiling rooms or low mounting heights of less than 20 feet. LED low bay lights to deliver high lumen performance while reducing energy consumption and glare in low ceiling areas. As the light levels across a given surface vary less between fixture mounting locations, they are emerging as a preferred choice. The extended use life cycle propels the demand. The high/low bay light segment is projected to generate USD 6757 million in 2030 and grow at a CAGR of 6% by 2030.
Based on end-user applications, the oil and gas industry is the largest market holder. It was valued at USD 1704 million in 2021. The presence of dangerous chemical compounds, oil and various gas in the oil and gas refining and processing facilities have the risk of electrical sparks igniting such compounds. As a result, the industry commands a large share of the demand for industrial LED lighting. Also, the industry is highly regulated for worker safety, which further contributes to the demand. The oil and gas industry is projected to generate USD 2596 million in 2030 and grow at a CAGR of 5% by 2030.
