The LED lighting market has been attracting traditional lighting firms to adjust business strategies in order to obtain market shares.
The global lighting market output value is estimated at around EUR50-60 billion (US$60.6-72.8 billion). Philips has annual average lighting revenues around EUR8 billion, which means it has about 16-17% of the global market, while its major competitors Osram and GE have around 8% and 6-7%, respectively. These industry leading lighting firms have well developed distribution channels around the world, but the total combined market share are only around 30%. This shows that the global lighting market is quite diverse and versatile.
Many traditional lighting firms held conservative views during the initial stage of LED lighting developments. Among the three industry leading lighting firms, only Philips adopted aggressive approaches to promote LED lighting products. The purpose for LED lighting products is to replace all traditional lightings. But most other firms were initially reluctant in developing LED lighting products because traditional lighting technology was mature and offered steady profit margins. They did not see the need to switch to the new technology.
This attitude has been changing in 2012 as many governments introduce energy-saving policies. Newcomers of the LED lighting market such as South Korea-based Samsung and LG have announced the aim to price LED light bulbs at US$10/unit. With this low price, traditional lighting firms have come to realize the necessity to join the trend to prevent eliminations.
In the past, the three major traditional lighting firms had over 50% of the market in Taiwan. Nevertheless, Everlight has introduced low price LED light bulbs and claimed to have 60% of LED light bulb market share in Taiwan. According to research institutes, May sales of LED light sources in Taiwan reached 20% of total lighting sales. This has prompted Philips to lower retail prices, narrowing the price gap with Taiwan-based firms to 25%. GE's LED lighting business were mainly focused in the US market, but the firm recently announced a plan to find LED OEM firms in Taiwan and will introduce LED lighting products to the Taiwan market. These are signs of the rising importance of LED lighting.
Lighting firms have been eyeing China's LED lighting market as well. Osram Opto Semiconductors announced in May a plan to construct an LED packaging plant in Wuxi, China. The firm expects to invest EUR250 million on the project. The purpose of the project is to meet demand of commercial, automobile and industrial LED lighting in China. GE also announced the opening of its China Innovation Center in Xian and promised to invest in US$2 billion within the next three years. GE noted that LED lighting developments will be one of the operations of the innovation center.
Philips announced in end of 2011 to invest and construct a LED lighting plant in Chengdu Tech Park, China with a total investment of EUR25 million throughout 2011-2015. Recently, the firm announced an additional investment of CNY700 million to set up an LED lighting fixture manufacturing base in Tianyi Demonstration Zone in Xiangtan, China. International firms have been setting up plants in China in order to lower production costs and focus on China's growing domestic market.
International lighting firms have been strengthening market penetration in Asia through local production. In addition, the firms have strong distribution channels that can easily help promote their LED lighting products. Furthermore, when price of LED lighting hits a sweet spot, consumers will make decisions according to brand recognitions, which is also likely to benefit international firms. Brand recognition is one of the challenges for newcomers of this industry.
