Editorials

LED Business Not Very Profitable in Past Fiscal Year; IoT is the One Bright Spot

With the beginning of September comes the start of the new fiscal year for the LED business. Unfortunately, the report card for most LED makers and LED lighting makers has not been good.

In recent years the LED lighting industry has become more and more like the conventional lighting industry with only a handful of very large manufacturers. The major LED makers are taking over the vast majority of LED production.

At the same time severe price competition from Asian suppliers has reduced much of the profitability of these companies. The recently instituted tariffs on trade goods from China has only hurt U.S. LED producers.

Luxeon High Power

A surplus of very inexpensive high and mid-power LED chips on the market has further eroded the profitability of producing LED lighting.

LED Grow Lights

One other sector of LED lighting that did OK were LED grow lights. There has been a uptick in the number of companies producing LED grow lights. The  LED grow lights can be controlled and adjusted to produce the required lighting spectrum. For this reason, makers of high power color LEDs have filled this niche. The latest LED grow lights bring together this controllability with some kind of control app. However, the added revenue from LED grow lights and supplying LEDs for grow lights does not compensate for the reduced revenues of general LED lighting.

 

Where does this leave the industry?

We should probably expect industry consolidation and the buying of small LED lighting firms at bargain prices. The industry will likely also cut back production on most LED chips and LED lighting. This is the time that the companies will tighten their belts (so to speak).

In addition to consolidation, companies will likely also sell off assets such as intellectual property, and production equipment. Some of the big lighting companies might buy the assets of another company but layoff much of the workforce to save money.

The one bright spot on the horizon for the lighting industry is the Internet of Things. Lighting is expected to serve as the backbone for much of the Internet of Things in offices, in residences, and throughout city infrastructure.

However, this bright spot will do little to add to the bottom line. Also, more and more LED lighting will feature simple ways of adding sensors for IoT applications in the future. This will mean that the lighting will continue to be used and in some cases the light source can be upgraded. However, the sensors and connectivity will likely be the most profitable part of the equation.

As expected, LEDs are now very inexpensive, and LED lighting is also very inexpensive as well. Also, LED lighting lasts a very long time before, new LED lighting is needed.

Leasing Lighting and Monitoring Service

One way to continue getting profits from Lighting is to essentially lease the controlled and monitored lighting as a service. In this way, companies can get the financial benefits of LED lighting without the upfront costs.

In theory, this could be combined with LyFy to extend Ethernet access with modulated LED lighting.

Internet service providers could theoretically work with LED lighting companies to provide such a service. Unfortunately, there is no indication that any companies are attempting to move in this direction.

So while the LED lighting business will probably scale back over the coming fiscal year, supplying lighting that serves as a backbone for the Internet of Things can provide some revenue for these companies.

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