Led Lamps Revenue US, US Led Downlights Market Segment, Led Troffers Sales in the US - Ken Research by Ken Research

April 2017

US LED Lighting Market Outlook to 2021 Rising Government Support to Improve Agriculture Sector with Demand for Hybrid Seed to Foster Growth

PRODUCTS MENTIONED • LED Directional • LED A-Type • LED Linear Fixtures • Building Exterior • LED Decorative • LED Parking Garage • Area/Roadway LED • LED Small Directional • Parking Lot LED • LED Low/High Bay

COMPANIES MENTIONED Cree, Philips, GE, Osram Sylvania, Lighting Science Group Corporation, Acuity Brands, TCP International Holdings

Table of Content

1. Executive Summary Market Potential Market Segmentation Competitive Landscape Future Analysis And Projections 2. Overview and Genesis For the US LED Lighting Market Genesis and Evolution of LED Lights The Use of LED Lights in the US 3. Comparative Analysis for the US LED Lighting Market with Global Market LED Patents in the Global Market 4. US LED Lighting Market Value Chain Analysis 4.1. Major Entities Involved in Value Chain and their Strategies 5. US LED Lighting Market Size, 2011-2016 5.1. By Revenue and Sales Volume, 2011-2016 6. US LED Lighting Market Segmentation 6.1. By Type of LEDs, 2014- 2016 6.1.1. By Type of Lamps, 2016 6.1.2. By Types of Luminaires, 2016 6.2. By Application of LED, 2014-2016 6.3. By Usage, 2016 6.3.1. By Indoor LEDs, 2016 6.3.2. By Application of Outdoor LEDs, 2016 6.4. By Distribution Channels, 2016 7. Trade Scenario for the US LED Lighting Market 7.1. By Exports, 2011-2015 7.2. By Imports, 2011-2015 7.3. Import Charges on LED Lighting Products, 2011-2015 8. Cost Analysis for LED Lighting in the US Market 9. Decision Making Process Before Purchasing LED Lighting in the US Market 10. Trends and Developments in the US LED Lighting Market 10.1. Growing Mergers and Acquisitions in the Market 10.2. Increasing Application of Non-Visible LED Lights 10.3. Increasing Awareness About Energy Saving 10.4. Rising Electricity Prices in the US 10.5. Development of Lighting Sales Channels 10.6. External legislation and subsidy Programs concerning energy efficiency 11. Issues and Challenges in US LED Lighting Market 11.1. Lack of Standardization 11.2. Limited Scope for Adoption of LED Lighting on Streetlights 11.3. High Operating Expenditure for Streetlight Applications 11.4. High Investment 11.5. Lack of Awareness About Advanced Lighting Technologies 11.6. Imperative to meet Customer Standards 11.7. Low Market Penetration 12. SWOT Analysis for the US LED Lighting Market 13. Recent Technologies in US LED Lighting Market

Table of Content

14. Manufacturing Clusters for LED and Component Manufacturers in the US 15. Government Initiatives and Regulations in the US LED Lighting Market 15.1. Energy Star Certification 15.2. DLC (Design Lights Consortium) 15.3. Lighting Facts 15.4. LED Lighting Facts Label 14.5. Other Standards for LED Lighting in US 16. Competitive Scenario in US LED Lighting Market 17. Competitive Landscape of Major Players in US LED Lighting Market 17.1. Cree Inc. 17.2. Philips 17.3. General Electric Company 17.4. Osram Sylvania 17.5. Lighting Science Group Corporation 17.6. Acuity Brands Inc. 17.7. TCP International Holdings Ltd. 18. US LED Lighting Market Future Outlook and Projections 18.1. By Revenues, 2017-2021 18.2. By Type of LED, 2021 18.3. By Usage, 2021 18.4. By Price, 2035 18.5. Upcoming Technologies in the Lighting Market 18.6. Analyst Recommendations 19. Macroeconomic Indicators Affecting US LED Lighting Market 19.1. Electricity Consumption in the US, 2011-2021 19.2. Revenues from Parking Lots and Garages in the US, 2011-2021 19.3. Housing Sales in the US, 2011 - 2021 19.4. Household Disposable Income in the US, 2011 - 2021 19.5. Average Price of LED Lights in the US, 2011 - 2021 20. Research Methodology 20.1. Market Definitions 20.2. Abbreviations 20.3. Market Size and Modeling Approach â&#x20AC;&#x201C; Market Sizing Market Sizing- US LED Lighting Market Variables (Dependent and Independent) Multi Factor Based Sensitivity Model Regression Matrix Limitations Final Conclusion Disclaimer Contact Us

Figure 1-1: Flow Chart for US LED Lighting Market Figure 4-1: US LED Lighting Market Value Chain Figure 4-2: Competitors along LED Value Chain (Non-Exhaustive)

LIST OF FIGURES

Figure 5-1: US LED Lighting Market Size on the Basis of Sales Value in USD Million and Growth Rate in Percentage, 2011-2016 Figure 5-2: US LED Lighting Market Size on the Basis of Sales Volume in Million Units and Growth Rate in Percentage, 2011-2016 Figure 6-1: US LED Lighting Market Segmentation by Type of LEDs (Lamps/Luminaires) on the Basis of Revenues in Percentage, 2014-2016 Figure 6-2: US LED Light Market Segmentation by Type of Lamps (LED Reflectors/LED Tubes/ Other LEDs) on the Basis of Revenue in Percentage (%), 2016 Figure 6-3: US LED Lighting Market Segmentation by Type of Luminaires (Downlights, Troffers, Roadway Fixtures, Outdoor Area Lights and Other Luminaires) on the Basis of Revenue in Percentage (%), 2016 Figure 6-4: US LED Lighting Market Segmentation by Application of LED on the Basis of Revenue in Percentage (%), 2014 - 2016 Figure 6-5: US LED Lighting Market Segmentation by Usage (Indoor/Outdoor) on the Basis of Revenue in Percentage (%), 2016 Figure 6-6: US LED Lighting Market Segmentation by Indoor LEDs (Commercial, Residential and Industrial) on the Basis of Revenues in Percentage (%), 2016 Figure 6-7: Housing Units in the US, 2014 - 2016 Figure 6-8: Available Industrial Space in the US in Thousand Square Meters, 2014 - 2016 Figure 6-9: Commercial Office Space in the US in Million Square Feet, 2015 - 2016 Figure 6-10: US LED Lighting Market Segmentation by Application of Outdoor LEDs on the Basis of Revenue in Percentage (%), 2016 Figure 6-11: US LED Lighting Market Segmentation by Distribution Channels (Electrical Wholesalers, Home Depot, ESCO, Utilities, Lighting Showrooms, and Direct/ National Accounts) on the Basis of Revenue in Percentage, 2016 Figure 7-1: US LED Lighting Export Market on the Basis of Export Value in USD Million, 20112015 Figure 7-2: US LED Lighting Export Market on the Basis of Export Volume in Million Units, 20112015 Figure 7-3: US LED Lighting Export Market by Major Destinations (Hong Kong, Mexico, Singapore and others) on the Basis of Export Value in Percentage (%), 2015 Figure 7-4: US LED Lighting Import Market on the Basis of Import Value in USD Million, 20112015 Figure 7-5: US LED Lighting Import Market on the Basis of Import Volume in Million Units, 20112015 Figure 7-6: US LED Lighting Import Market by Major Destinations (China, Japan, Malaysia, Taiwan and others) on the Basis of Import Value in Percentage, 2015 Figure 7-7: Import Charges Including Insurance and Freight Charges on LED Lighting Products in the US in USD Thousand and Contribution to Overall Import Value in Percentage, 2011-2015

Figure 8-1: Cost Breakdowns of LED Lights (Outdoor Area Lamps, Interior Downlights and Replacement Lamps) in the US LED Lighting Market on the Basis of Mechanical/ Thermal/ Electrical Charges, Drivers, Assembly, LED Package, Optics and Overheads in Percentage (%), 2015 Figure 8-2: Cost Breakdown for LED Package on the Basis of components in Percentage, 2016

LIST OF FIGURES

Figure 10-1: Average Retail Electricity Prices in the US in Cents per Kilowatt Hour, 2010-2015 Figure 17-1: Financial Performance of Cree Inc. on the Basis of Revenues from Sale of LED Lighting and LED Products in USD Million, 2011-2016 Figure 17-2: Financial Performance of Cree Inc. on the Basis of Net Revenues from Sale of LED Products in the US in USD Million, 2014-2016 Figure 17-3: Gross Margin of Cree Inc. from Sale of LED Products in the US in Percentage, 2014-2016 Figure 17-4: Financial Performance of Philips on the Basis of Net Revenues from Sale of LED Products in North America in USD Million, 2011-2015 Figure 17-5: Revenue Share from Sales of Philips LEDs in the Company’s Overall Sales in the US Market in Percentage, 2011-2015 Figure 17-6: Financial Performance of GE on the Basis of Revenues from Appliances and Lighting Business in USD Billion, 2011-2015 Figure 17-7: Financial Performance of GE on the Basis of Net Revenues from Sale of LED Products in the US in USD Million, 2014-2015 Figure 17-8: Revenue Share from Sales of LED Lights in the Company’s overall sales in the US Market in Percentage, 2013-2015 Figure 17-9: Financial Performance of Osram Sylvania on the Basis of Revenues from US in USD Million, 2012-2016 Figure 17-10: Financial Performance of Osram Sylvania on the Basis of Revenues Share from LED Business in Percentage (%), 2012-2016 Figure 17-11: Financial Performance of Lighting Science Group Corporation on the Basis of Revenues from LED Lighting in the US in USD Million, 2011-2015 Figure 17-12: Financial Performance of Lighting Science Group Corporation’s on the Basis of Share of LED Lights from Home Depot on the Basis of Revenues in Percentage (%), 2013-2015 Figure 17-13: Annual Advertising Expenditure of Lighting Science Group Corporation in USD Thousand, 2013-2015 Figure 17-14: Financial Performance of Acuity Brands on the Basis of Net Sales in USD Million, 2011-2016 Figure 17-15: Financial Performance of TCP International Holdings Ltd. on the Basis of Net Revenues from Sale of LED Lights in the US in USD Million, 2012-2014 Figure 17-16: Financial Performance of TCP Lighting on the Basis of Contribution of Revenues from US in Percentage (%), 2013-2015 Figure 18-1: Future Outlook and Projections for the US LED Lighting Market on the basis of Revenues in USD Million, 2017-2021 Figure 18-2: Projected Efficacy of LED Lamps in US by Lamp Type (Lumens per Watt), 2015 and 2020

Figure 18-3: Future Outlook and Projections for the US LED Lighting Market by Type of LEDs on the basis of Revenues in Percentage, 2021 Figure 18-4: Future Outlook and Projections for the US LED Lighting Market by Usage (Indoor/ Outdoor) on the basis of Revenues in Percentage, 2021

LIST OF FIGURES

Figure 19-1: Electricity Consumption in the US on the basis of Kilowatt Hours in Billions, 2011 - 2021 Figure 19-2: Revenues from Parking Lots and Garages in the US in USD Billion, 2011 - 2021 Figure 19-3: Housing Sales in the US on the Basis of Units Sold in Thousands, 2011 - 2021 Figure 19-4: Household Disposable Income in the US in USD Billion, 2011 - 2021 Figure 19-5: Average Price of LED Lights in the US in USD, 2011 - 2021

Table 2-1: Average Daily Operating Hours by End Use Sector, 2010 Table 2-2: Average and Most Efficacious LED Products from DOEâ&#x20AC;&#x2122;s Lighting Facts Database Table 2-3: Cost and Performance Comparison of Different Types of Lighting (LED Lamp, CFL Light and Incandescent Bulb) Table 3-1: Top Patent Holders for LED General Lighting in Global Market, 2015

LIST OF TABLES

Table 5-1: Rationale and Description for US LED Lighting Market on the Basis of Revenue and Sales Volume, 2011-2016 Table 6-1: Rationale and Description for US LED Light Market Segmentation by Type of LEDs, 2014-2016 Table 6-2: US LED Lighting Market Segmentation by Type of LEDs (Lamps/Luminaires) on the Basis of Revenue in USD Million, 2014-2016 Table 6-3: Rationale and Description for US LED Light Market Segmentation by Type of Lamps, 2016 Table 6-4: US LED Light Market Segmentation by Type of Lamps (LED Reflectors/LED Tubes/ Other LEDs) on the Basis of Revenue in USD Million, 2016 Table 6-5: Rationale and Description for US LED Lighting Market Segmentation by Type of Luminaires, 2016 Table 6-6: US LED Lighting Market Segmentation by Type of Luminaires (Downlights, Troffers, Roadway Fixtures, Outdoor Area Lights and Other Luminaires) on the Basis of Revenue in USD Million, 2016 Table 6-7: LED Downlights Energy Consumption and Savings Potential in the US, 2012 Table 6-8: LED Troffers Energy Consumption and Savings Potential in the US, 2012 Table 6-9: LED Streetlights Energy Consumption and Savings Potential in the US, 2012 Rationale and Description for US LED Lighting Market Segmentation by Table 6-10: Application of LED, 2014 - 2016 Table 6-11: US LED Lighting Market Segmentation by Application of LED on the Basis of Revenue in USD Million, 2014 - 2016 Table 6-12: Prices of Types of LEDs in USD, 2011-2015 Table 6-13: LED Directional Lamps Energy Consumption and Savings Potential in the US, 2012 Table 6-14: LED Parking Garage Consumption and Savings Potential in the US, 2012 Table 6-15: LED Parking Lot Consumption and Savings Potential in the US, 2012 Table 6-16: Rationale and Description for US LED Lighting Market Segmentation by Usage, 2016 Table 6-17: US LED Lighting Market Segmentation by Usage (Indoor/Outdoor) on the Basis of Revenue in USD Million, 2016 Table 6-18: Rationale and Description for US LED Lighting Market Segmentation by Indoor LEDs on the Basis of Revenues, 2016 Table 6-19: US LED Lighting Market Segmentation by Indoor LEDs on the Basis of Revenue in USD Million, 2016

Table 6-20: Best LED Light Bulbs for Residential Purposes, March 2017 Table 6-21: US LED Lighting Market Segmentation by Application of Outdoor LEDs on the Basis of Revenues in USD Million, 2016

LIST OF TABLES

Rationale and Description for US LED Lighting Market Segmentation by Table 6-22: Distribution Channels, 2016 Table 6-23: US LED Lighting Market Segmentation by Distribution Channels (Electrical Wholesalers, Home Depot, ESCO, Utilities, Lighting Showrooms, Direct/National Accounts) on the Basis of Revenue in USD Million, 2016 Table 7-1: US LED Lighting Export Market by Major Destinations (Hong Kong, Mexico, Singapore and others) on the Basis of Export Value in USD Million, 2015 Table 7-2: US LED Lighting Import Market by Major Destinations (China, Japan, Malaysia, Taiwan and others) on the Basis of Import Value in USD Thousand, 2015 Table 9-1: Customer Decision Making Process before Purchasing LED Lights in the US Table 9-2: Analysis of LED Color Temperature Table 10-1: Latest Acquisitions in US LED Lighting Market, 2015-2016 Table 10-2: Comparison of Incandescent bulbs, CFLs and LED lights on the Basis of Cost Incurred Table 11-1: Number of LEDs Installed and Penetration Rate in the US Lighting Market, 2014 Table 11-2: Number of LEDs Installed and Penetration Rate in the US Lighting Market, 2015 Table 12-1: SWOT Analysis for the US LED Lighting Market Table 13-1: Recent Technologies in US LED Lighting Market Table 14-1: LED Lights and Components Manufacturing Clusters in the US Table 15-1: Standardization Bodies for LED Lighting in the US Table 15-2: Legislation and Documentation required to become Eligible for Posting LED Products on Energy Star Website Table 17-1: Company Profile for Cree Inc. Including Company Overview, USP, Business Strategy, Key Customers, Best Selling Products, Major Source of Revenue, Recent Developments and Total Number of Employees. Table 17-2: Product Portfolio of Cree Inc and Price per Unit in USD Table 17-3: Plant Locations for Cree Inc. in the US and Total Area of Each Plant in Sq. Ft. Table 17-4: Company Profile of Philips Including Company Overview, USP, Business Strategy, Product Portfolio, Plant Location in the US, Recent Developments and Total Number of Employees. Table 17-5: Philips Lighting Product Portfolio, 2016 Table 17-6: Company Profile of General Electric Company Including Company Overview, USP, Business Strategy, Key Customers, Partnerships and Acquisitions, Product Portfolio, Plant Location in the US, Recent Developments and Total Number of Employees. Company Profile of Osram Including Company Overview, USP, Business Table 17-7: Strategy, Product Portfolio, Plant Location in the US, Recent Developments and Total Number of Employees.

Table 17-8: Osram LED Lighting Product Portfolio Table 17-9: Company Profile of Lighting Science Group Corporation Including Company Overview, USP, Business Strategy, Product Portfolio, Subsidiaries, Patents, Plant Location in the US, Recent Developments and Total Number of Employees.

LIST OF TABLES

Table 17-10: Company Profile of Acuity Brands Inc. Including Company Overview, USP, Business Strategy, Brand Names, Product Portfolio, Plant Location in the US, Recent Developments, Revenue and Employees Company Profile of TCP International Holdings Ltd. Including Company Table 17-11: Overview, USP, Business Strategy, Brand Names, Product Portfolio, Subsidiaries, Plant Location in the US, Recent Developments and Total Number of Employees. Table 18-1: Future Outlook for the US LED Lighting Market on the Basis of Revenues, 2017 -2021 Table 18-2: Future Outlook and Projections for the US LED Lighting Market by Type of LEDs on the basis of Revenues in USD Million, 2021 Table 18-3: LED Lights and Luminaires Prices in USD, 2020 - 2035 Table 18-4: Rationale for Upcoming LED Technologies in the Lighting Market of the US Table 18-5: Analyst Recommendations for US LED Lighting Market Table 19-1: Rationale for Electricity Consumption in the US, 2011 - 2021 Table 19-2: Rationale for Parking Lots and Garages in the US, 2011 - 2021 Table 19-3: Rationale for Housing Sales in the US, 2011 - 2021 Table 19-4: Rationale for Household Disposable Income in the US, 2011 - 2021 Table 19-5: Rationale for Average Price of LED Lights in the US, 2011 - 2021 Table 20-1: Correlation Matrix for the US LED Lighting Market Table 20-2: Regression Coefficients Output

EXECUTIVE SUMMARY Figure 1-1: Flow Chart for US LED Lighting Market

US LED Lighting Market (USD 7,494.1 million)

LED Lamps (USD 3,896.9 million)

Indoor LED (USD 6,038.2 million) LED Luminaire (USD 3,597.2 million)

Commercial (USD 3,147.5 million)

LED Reflectors (USD 1,480.8 million)

Troffers (USD 539.6 million)

LED Tubes (USD 1,363.9 million)

Downlights (USD 1,079.2 million)

Other LED (USD 1,052.2 million)

Roadway Fixture (USD 503.6 million)

Other Luminaire (USD 1,151.1 million)

Source: Ken Research Analysis

Outdoor Area Lights (USD 323.7 million)

Outdoor LED (USD 1,461.4 million) Residential (USD 2,622.9 million) Industrial (USD 262.3 million)

Building Exterior (USD 824.4 million) Area/ Roadway (USD 187.4 million) Parking Lot (USD 149.9 million) Parking Garage (USD 299.8 million)

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EXECUTIVE SUMMARY

MARKET POTENTIAL

respectively in 2016. The dimming requirements and The LED lighting market of the US has witnessed high color quality provided by decorative LEDs has a rapid growth over the recent past. Technological enabled the segment to garner revenues worth USD advancements in the market have been the major 599.5 million during 2016. Further, LED for parking reason responsible for growing product lines of LED garage, Roadway LED, Small Directional LED, Parking lights in the country. The growing concern among lot LED and High/Low Bay LED contributed 4%, 2.5%, the population about the amount of heat emitted by 2.3%, 2.0% and 1.2% respectively to the total revenues traditional fluorescent lights has made people shift to of LED lights in 2016. more energy saving resources, thereby expanding the By Usage (Indoor LEDs and Outdoor LEDs) overall size of LED lighting market in the country from The increasing awareness about energy saving USD 1,131.8 million in 2011 to USD 7,494.1 million resources in the US further boosted the demand for during 2016. indoor LED lights in the residential sector, making

MARKET SEGMENTATION By Type of LEDs Lower initial cost and ease of installation of LED lamps have made lamps to dominate the market, contributing 52.0% of the revenue to the total revenues of US LED market in 2016. LED luminaires have been successful in driving the overall LED lighting market of the US by increasing their revenue share from 40.2% in 2014 to 48.0% in 2016. The traditional use of incandescent bulbs has been replaced by the use of LED reflectors, contributing revenue share of 38% to the overall market from the sale of LED lamps. LED tubes and other LEDs typically including simple bulbs contributed 35% and 27% share to the revenues of LED lamps in the US respectively. LED luminaires which include downlights, troffers, roadway fixtures, outdoor area lights and other luminaires generated revenues worth USD 1,079.2 million, USD 539.6 million, USD 503.6 million, USD 323.7 million and USD 1,151.1 million revenues respectively in the LED lighting market of the US during2016. By Application of LED Lights The increased demand for directional LEDs by shopping malls to showcase their products and their use in flood lights, made this segment dominate the LED market with revenue share of 37.0% in the overall sales of LED lights during 2016. Following directional LEDs, A-Type LEDs generated revenue of USD 1,423.9 million in 2016. LED linear fixtures and building exteriors contributed 13% and 11% of the revenues

them contribute USD 6,032.8 million to the total revenue generated from the sales of LED lights in the country during 2016. However, outdoor LEDs have contributed 19.5% to the revenues of LED lights in 2016. Indoor LEDs which are used in commercial, residential and industrial sector have contributed 52.2%, 43.5% and 4.3% share to the total sales of indoor LED lights in the US during 2016 respectively. Outdoor LEDs that are used in building exteriors, parking garage, roadway and parking lots contributed 56.4%, 20.5%, 12.8% and 10.3% share in revenues during 2016 respectively. By Distribution Channels LED lights in the US are sold through various channels including both online and offline platforms. Electrical wholesalers occupied the majority market share with USD 4,796.2 Million in 2016. The online platform, Home Center contributed 10% to the overall sales of LED lights in 2016. ESCO, Utilities, Lighting Showrooms and Direst Sales further added 8%, 7%, 6% and 5% respectively to the overall sales of LEDs through various distribution channels in the US during 2016.

COMPETITIVE LANDSCAPE US LED lighting market is highly concentrated with the presence of few leading lighting manufacturers in the country. Since the sector requires large amount of capital to be invested, this has inhibited the emergence of several companies in the space. Frequent introduction of new LED products, rapid changes in

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technology, changing customer requirements, short product life cycles and prices of similar technology by various companies are common platforms on which the competition prevails in the overall lighting market of the US. Lighting products segment currently faces competition from traditional lighting fixture companies, lamp manufacturers and from nontraditional companies focused on LED lighting systems including fixtures and lamps. Lighting companies such as Cree, Acuity brands, Copper Lighting division of Eaton Corporation, general electric company, Hubbell Incorporated, Philips and Osram are the major competitors in the market. Apart from this, there are also small and medium sized lighting companies. General Electric being considered as the leading global player has multiple products within its product portfolio and leads the market in terms of number of products sold to the US population. However, Lighting Science Group Corporation is one of the renowned manufacturers of LED lights in the US and therefore serves to residential, commercial and industrial sectors with its distinguished product lines. The increasing competition in the market due to more variety of LED products offered at competitive prices fuels up the overall rivalry among the existing players

EXECUTIVE SUMMARY

which manufacture and sell LED lights in the country. All major players compete on grounds of innovation so that they can create and expand their customer base in the US.

FUTURE ANALYSIS AND PROJECTIONS The US LED lighting market is expected to grow at a rapid pace with a decent CAGR of 25.7% from 2017 to 2021 owing to rising number of market players, increasing awareness about online energy saving lights among customers, and growing efforts of government to shift customers towards LED lights. The LED lighting market will witness launch of innovative LED products being introduced in the market which will lead to an increase in demand by the population, thus making the LED industry contribute a larger share to the total economy. LED lighting manufacturers are expected to expand in size and number in the upcoming years. This will offer more products to customers and will also make them aware about the low cost benefits of LED lights that will act as the drivers to increase the number of people who will opt for such lighting techniques in the country. The overall LED lighting market of the US is expected to generate revenue of USD 23,559.9 million by 2021 by growing at an expected 5 year CAGR of 25.7%.

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OVERVIEW AND GENESIS FOR THE US LED LIGHTING MARKET GENESIS AND EVOLUTION OF LED LIGHTS

promoting energy efficient sources of lighting in the Lighting market was traditionally dominated country. This led to the advent of Compact Fluorescent Lights (CFLs). Initially, CFLs were quite expensive in by fluorescent tube lights (FTLs) and the US market. However, rising demand and high incandescent bulbs (ICLs) until a decade ago. economies of scale led to a fall in the prices of CFLs The prime reasons attributed to their dominance were in the country. easy availability, cheaper products relative to other With the advancements in technology, superior lighting products and easy installation. However, sources of lighting such as LEDs came into the these lighting sources were highly inefficient in terms market. Light Emitting Diodes (LEDs) are solid state of energy consumption. FTLs and ICLs use close to semiconductor devices without mercury content being 20% of energy whereas the remaining energy is present in them. The manufacturing of LED lights is converted into heat. quite complex and requires raw materials such as The government of the US identified these glitches in the lighting sector and therefore started aggressively

LED chips, heat sink and thermal interface material.

Table 2-1: Average Daily Operating Hours by End Use Sector, 2010

Type of LED

Residential

Commercial

Industrial

Retail

All Sectors

Incandescent Halogen Compact Fluorescent Linear Fluorescent High Intensity Discharge LED

1.8 1.9 1.8 1.9 2.5 1.5

10.4 12.4 10.4 11.1 11.1 20.8

12.6 11.7 13.1 12.5 16.8 22.3

9.0 10.5 9.0 14.0 12.3 9.8

2.0 3.5 3.2 9.0 12.3 5.5

Source: US Department of Energy

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THE USE OF LED LIGHTS IN THE US

OVERVIEW AND GENESIS FOR THE US LED LIGHTING MARKET

and environment friendly lighting solutions.

Light-emitting diodes (LEDs) are semiconductor devices that convert electricity to light. LED lighting is also called solid state lighting because the light is emitted from a solid object, which is a block of semiconductor material rather than from a vacuum or gas tube, as in traditional incandescent or fluorescent lights.

Reduction in the price of LED has accelerated over the past few years. The considerable overcapacity of LED chips and packages has built up due to huge investment in LED chip/package production lines in China. The US government is focusing to shift people from the use of traditional fluorescent lights to the use of LED lights due to the reason that such The market for LED lighting in the US lights are energy efficient and cost effective. Since the initial cost of installation in high, government has expanded owing to the technological offers subsidies to customers opting for LED lights improvements and decreased cost of such and is simultaneously focusing on reducing cost of lights overtime. production of local manufacturers, thereby resulting Additionally, LED lights market witnessed increased in lower product prices overtime. The government tied demand overtime as such lights are long lasting, up with various public welfare bodies to widespread energy efficient, environment friendly and durable. the awareness about the benefits of using LED lights The low voltage required by LEDs to emit lights made over other conventional sources of lighting. LED lights it a suitable lighting source for residential, commercial are expected to revolutionize the lighting market of the country over the coming years. and industrial sectors of the US.

The US Department of Energy invited manufacturers to participate in LED Lighting Facts Program, wherein they could display The growing concern among the population their products and showcase product testing about the amount of heat emitted by procedures. traditional fluorescent lights has made them According to the facts of the program, reflectors shift to more energy saving resources dominated the market where wide range of LED The increased demand for LED lights is supplemented by the rising awareness among people towards the environmental issues.

thereby expanding the overall size of LED lighting market in the country. Over the past few years, the US government has been increasing its focus to replace traditional and less efficient lighting systems with highly energy efficient, environment friendly and cost effective LED technology. Though the operating cost of LED lighting systems is quite low, higher per unit prices were initially restricting their adoption among consumers. Nevertheless, the adoption of LED lighting products has been robustly increasing over the last five years as researchers have been continuously focusing on reducing the cost of production, thereby resulting in significantly lower product prices. In addition to continuously declining LED prices, LED adoption is witnessing a continuing growth due to increasing consumer interest towards adopting highly efficient

products was available. Three large players i.e. Philips (the Netherlands), OSRAM (Germany), and General Electric (United States) have traditionally dominated the general lighting market: Each of these has developed a strong presence in LED lighting through joint ventures with, and acquisitions of, specialty firms. Philips, for instance, has a large facility, Lumileds, in California and is a major manufacturer of LED chips for use in the companyâ&#x20AC;&#x2122;s own packaged LED lighting products; it also sells packaged chips to other firms. OSRAM is a top manufacturer of LED components, as is General Electric, under its Ohio-based subsidiary Lumination (formerly Gelcore). While these traditional lighting giants have so far played a leading role in the LED general lighting industry, they face competition from new LED lighting firms, especially in Japan, Taiwan, Korea, and other Asian countries.

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OVERVIEW AND GENESIS FOR THE US LED LIGHTING MARKET

Table 2-2: Average and Most Efficacious LED Products from DOE’s Lighting Facts Database

Application A-type Directional MR16 Decorative Downlights

Troffers High-Bay Parking Garage Parking Lot Streetlights

LED Replacement Criteria Product Description Lumen Range (lm) A-type replacement lamps 700-1,100 PAR, BR and R 20, 30, 38 600-1,300 lamps MR16 lamps 400-600 Decorative replacement 400-700 lamps Recessed/surface-mounted 600-1,500 downlight luminaires Recessed/surface-mounted 1,000-8,000 troffer luminaires High and low bay luminaires 15,000-35,000 Parking garage luminaires 1,000-6,000 Outdoor area/roadway luminaires Outdoor area/roadway/ decorative luminaires

LED Efficacy (lm/W) Average Best 69 94 57 89 55 58

77 77

119

88 72

110 106

10,000-20,000

101

10,000-20,000

110

Source: US Department of Energy, Ken Research Analysis

Table 2-3: Cost and Performance Comparison of Different Types of Lighting (LED Lamp, CFL Light and Incandescent Bulb)

Parameters

LED Lamps

CFL Light

Incandescent Bulb

Light Bulb Minimum Lifespan Power Consumption in Watts Cost Per Bulb in USD KWH used over 20,000 hours Cost for 20K hours in USD Total Cost for 20,000 hours in USD Mechanical Endurance Use of Risky Chemicals Effect of Voltage Fluctuation

30,000 hours 7W 10.6 140 10.8 21.4 Non Breakable No No

2,000 hours 14W 1.8 280 21.5 40.0 Glass Yes Certain

1,000 hours 60W 0.2 1,200 92.3 96.0 Glass Delicate No Dimming

Source: US Department of Energy, Ken Research Analysis

COMPARATIVE ANALYSIS FOR THE US LED LIGHTING MARKET WITH GLOBAL MARKET The global market for LED lighting has showcased a robust performance backed by bans on incandescent lights that has led to the gradual entry of LED products in the residential lighting markets and other sectors. Improved LED luminous efficacy and lowered LED product prices contributed to higher consumer acceptance levels and rising penetration rates. Japan is considered as the largest market for LED lighting across global market, followed by Europe and North America. China LED lighting market has posted phenomenal growth and is growing at the fastest growth rate due to concentration of manufacturers producing Lighting and LED products.

The LED residential lighting market development in other regions including Europe, U.S., Japan, Taiwan and emerging markets is also being spurred by establishment of policy standards, and manufacturers promotion of product and pricing strategy.

relative to production volumes.

Japan: Japanese lighting manufacturers have developed new business strategies, due to fierce pricing competitions in the bulb market and gradual market saturation. Japanese manufacturers have differentiated their products in the market by focusing on high power LED lamps and high performance products, developing ceiling lights, or expanding into emerging markets including Vietnam and Taiwan.

North America: In North America, US have been the largest market for LED lighting. An increase in new home sales and arrival of LED lamp has supported the US residential LED market.

Establishment of luminaire standards, such as Energy Star and others are directing the market towards China: China LED lighting market was standardization. Some of the leading manufacturers evaluated at around USD 8,250 million including Cree, GE and Philips have concentrated the market for LED lighting with expanded product during 2015. lines and releases of new products with high price / Chinese authorities have emphasized on increasing performance ratio production volumes, in order to attain higher economies of scale. A higher production volume Europe: Europe LED market has intensified after by has enabled local producers to charge lower prices the ban on incandescent lamps. The average price of thereby eliminating foreign competition. Additionally, LED lamps continued to plunge in the country with the China has well developed facilities for manufacturing launch of lighting products coupled with intelligent solutions. For instance, Philips has launched Hue LED LED chips. lamps using Wi-Fi to control and switch light color. Due to higher production of LED chips in the Osram is also using lighting control systems from country, the growth rate of production value subsidies to integrate LED lighting with intelligent of LED chips has increased at a slower rate control systems in Europe Additionally, since China has complete control over yellow phosphor, a rare raw material used in LED lights, the country continues to use it to its trade advantage. The Chinese government has been actively involved in the promotion of LED lights in the country. Besides directly funding LED projects, the government has been offering LED lights at a subsidized rate.

ÂŠ Licensed product of Ken Research; should not be copied

COMPARATIVE ANALYSIS FOR THE US LED LIGHTING MARKET WITH GLOBAL MARKET

LED PATENTS IN THE GLOBAL MARKET Table 3-1: Top Patent Holders for LED General Lighting in Global Market, 2015

Patent Holders Philips Osram Cree Panasonic Toshiba Foxconn LG Fu Zhun Precision Ind Shenzhen General Electric Semiconductor Energy Laboratory Sharp Samsung Foxsemicon Integrated Tech Inc Osram Ag Rohm Zumtobel Lighting GMBH Eveready Battery Cirrus Logic Gelcore LLC ABL IP Holding LLC Hongfujin LSI Industries Inc Mitsubishi

Number of Equivalents 816 652 576 573 400 367 242 240 175 162 158 123 118 109 109 103 81 58 58 57 57 51 51

Source: Relecura Reports An EQUIVALENT refers to a set of patent filings with the same priority documents, representing a single invention

Â© Licensed product of Ken Research; should not be copied

US LED LIGHTING MARKET VALUE CHAIN ANALYSIS The LED lighting value chain is very wide and complex, comprising a large number of retailers, distributors, material suppliers, component suppliers and assemblers. The value chain for LED lights comprises of five segments which include materials, components, finished goods, distribution and final sales. Materials are gathered in raw state to produce the components which will form the bases for LED lights. Using such components, the manufacturers produce the final product which is ready to be marketed for sales. Various channels are then considered to make the products available to the final customers where these products will serve the requirements for which they were manufactured. Each level of the chain adds a value to the overall LED light before it finally becomes available in the market. The sales of LED general purpose lighting is negligible from retail stores. Instead, LED distribution has occurred primarily through Internet sales and direct sales to businesses and builders. For example, Cree has made volume shipments to significant building projects including corporate campuses, hotels, and restaurants. These large businesses have managed to generate economics of LED-based lighting increasingly

compelling, especially since much of their lighting is on most or all of the time, and frequent replacement of traditional bulbs is expensive. The producers of LED lights have developed assembling facilities within the country. Alternatively, manufacturers offer contracts to Original Equipment Manufacturers (OEMs) and the products are then rebranded in order to sell in the domestic market. The products are sold to the distributors who further sell them to retailers. Additionally, in order to be active participants in the supply chain, a number of players have set up exclusive retail stores for LED lights across the country and are easily available through online platforms including Home Depot.

Profit margin in case of direct sales of LED lights from the manufacturers to the customers is about 15% to 20% whereas in case of dealer led sales dealer has an upper hand with profit margin of 10% to 15% and a mere 5% profit margin is earned by the manufacturer.

ÂŠ Licensed product of Ken Research; should not be copied

US LED LIGHTING MARKET VALUE CHAIN ANALYSIS

Figure 4-1: US LED Lighting Market Value Chain

Materials

Components

Finished Products

Distribution

End Use

Synthetic Sapphire

LED chip

Product design

Internet

Industrial

Gallium

Bond wire

Led lamps and luminaries

Direct to builders

Commercial

Indium

Connectors

Marketing

Government

Outdoor

Silicon Carbide

Diode

Fixtures

Big box Retail Stores

Residential

Aluminum

Driver

Epoxy resin

Epoxy resin encapsulate

Copper

Optics (lens)

Glass

Printed circuit board

Plastic

Reflector cup Terminal pins

Source: Ken Research Analysis

ÂŠ Licensed product of Ken Research; should not be copied

US LED LIGHTING MARKET VALUE CHAIN ANALYSIS

Figure 4-2: Competitors along LED Value Chain (Non-Exhaustive)

Component Production

Lamp Production

Luminaire Production

Lighting Production

Installation Services

Lamps and Luminaries Osram Manufacturers Philips Lighting Luminaries Manufacturers Component Manufacturers

Zumtobel Trilux Cree Nichia

Service Providers

Smaller Construction and Engineering Firms Core Business

Non – core Business

Source: Ken Research Analysis

MAJOR ENTITIES INVOLVED IN VALUE CHAIN AND THEIR STRATEGIES Established lamp and luminaire manufacturers: The replacement business for LED lighting is on the downswing; manufacturers such as Samsung LED, Osram, and Philips Lighting have to revise their marketing strategies, since the LED revolution calls for nothing less than a dismantling and recreation of current business models. As these companies are striving to maintain market dominance, trend of vertical integration along the value chain has been witnessed. Some leading LED manufacturers have started expanding their market positions such as GE’s recent acquisition of Israeli LED specialist Lightech. Others have created cooperative relationships, such as the comprehensive LED-patent cross-licensing agreement between Philips and Cree.

entering the lighting market of US. Sharp and Panasonic have entered the market which are predominantly from the semiconductor industry.

The entry barriers are high in the market because of capital intensive business, significant intellectual property issues and entrenchment of existing players namely Seoul Semiconductor, Cree, Nichia, Philips, and Osram. Furthermore, the modules and drivers business is fragmented (products are still not standardized), and the luminaire business has thousands of players.

Component manufacturers and service providers: LED revolution in the US represents a sizeable opportunity Luminaire manufacturers: Luminaire makers, such as for component manufacturers and service providers Zumtobel and Lithonia Lighting, have not witnessed to expand their activities—identifying unique selling much influence on their production or business models propositions and then occupying relevant positions since only the light source has changed, not the fixtures. along the value chain. Also, integration along the value Nonetheless, it is significant that Philips acquired Genlyte, chain is a viable strategy. For example, a company that the former number-two luminaire manufacturer in North provides installation services might consider backward America, in an effort to control fixture production. Such integration by acquiring a semiconductor manufacturer, consolidation is likely to continue in the future as well thus taking advantage of its existing base of commercial New entrants: Companies in unrelated industries are and industrial customers

US LED LIGHTING MARKET SIZE, 2011-2016 BY REVENUE AND SALES VOLUME, 2011-2016 Table 5-1: Rationale and Description for US LED Lighting Market on the Basis of Revenue and Sales Volume, 20112016

Year

Description

• The revenues generated from the sale of LED lights in the US was evaluated at USD 2,192.0 million during 2013, inclining from USD 1,131.8 million during 2011. • The energy efficiency programs funded by Rateplayer in the US expanded to USD 7 Billion in 2011 from USD 2.6 Billion in 2007. This aided the growth in demand of the people towards LED lights, thereby making the companies to generate higher revenues. • There was an increase in efforts from marketers and LED Vendors to shift people from 2011-2013 regular modes of lighting to LED technology. Campaigns and advertisements witnessed a rise so as to make customers aware about the benefits of using LED lights in both residential and commercial sector. • The Retrofit program during the review period provided incentives to commercial businesses to save the upfront cost by installing light emitting diodes in their units. This program contributed 78% to the total savings of business programs. • The revenues generated from the sale of LED lights in the country almost doubled from USD 3,809.9 million during 2014 to USD 7,494.1 million during 2016. • Manufacturers of LED lights have indicated that the growth in LEDs market revenues is directly dependent on the economic growth of the country. • The rising awareness for global warming made people switch to LED lights from the traditional use of fluorescent bulbs which emit heat and CFCs thereby impacting the environment. This augmented the growth of LED lighting market in the country. 2014-2016 • With the saturation of LED technology, there were innovative designs in the market which attracted people to use LED lights for decorative purposes, thereby boosting the retail sales of light emitting diodes in the US. • Rising expenditure of government on infrastructural developments including roadways and buildings have increased the demand for LED lights and fixtures to be installed in such areas, thus augmenting the revenues generated by the overall LED lighting market of the country. • The LED lighting industry witnessed a CAGR of 45.9% during the period 2011-2016. Source: Interviews with the US LED Lighting Market Professionals, Industry Articles, Ken Research Analysis

US LED LIGHTING MARKET SIZE, 2011-2016

Figure 5-1: US LED Lighting Market Size on the Basis of Sales Value in USD Million and Growth Rate in Percentage, 20112016

8,000

73.8%

7,494.1

80%

7,000 64% 5,443.7 55.0%

5,000 40.0%

48% 3,809.9

4,000

42.9% 37.7%

3,000

32%

Percentage

USD Million

6,000

2,192.0 2,000 1,000 0

1,131.8

2011

16%

1,388.6

2012 USD Million

2013

2014

2015

2016

Growth Rate

Source: US Energy Department, Ken Research analysis The market for LED lighting has been defined as the total domestic sales for general LED lighting, computed at the retailer’s price level. The market comprises with the sales from Lamps and luminaire on the basis of type of LED and Indoor & Outdoor applications. The revenues include LED A-Type, LED Decorative, LED Directional, LED Small Directional, LED Linear Fixtures, and LED Low/High Bay, Area/Roadway LED, Parking lot LED, LED Parking Garage and Building exterior

US LED LIGHTING MARKET SIZE, 2011-2016

Figure 5-2: US LED Lighting Market Size on the Basis of Sales Volume in Million Units and Growth Rate in Percentage, 2011-2016

500

160%

147.5% 441.4

128%

104.3%

300

239.9

75.9% 200

96% 84.0% 64%

65.6%

Percentage

USD Million

400

117.4 32%

100

16.3

28.7

2011

2012 Million Units

47.5

2013

2014

2015

2016

Growth Rate

Source: US Energy Department, Ken Research analysis

Â© Licensed product of Ken Research; should not be copied

US LED LIGHTING MARKET SEGMENTATION BY TYPE OF LEDS, 2014- 2016 Table 6-1: Rationale and Description for US LED Light Market Segmentation by Type of LEDs, 2014-2016

Segment

Rationale

• Lower initial cost and ease of installation of LED lamps have made this segment dominate the market contributing 52.0% of the revenue to the total revenues of US LED lighting market in 2016. • LED lamps were traditionally used by residential sector, whereas lower cost of installation was one of the major factors behind its usage in commercial sector in the present Lamps scenario. • However, limitation of variety and ultra modern designs in LED lamps makes this segment witness a decrease in market share overtime. • Considered as short term lighting solutions, LED lamps are still the most familiar LED lights known to people due to their early acceptance than other LED technologies. • LED luminaires have been successful in driving the overall LED lighting market of the US by increasing their revenue share from 40.2% in 2014 to 48.0% in 2016. • The wider acceptability of LED luminaires for outdoor lighting solutions has made this segment increase its share in the recent past. Luminaires • The designs offered in LED luminaires including troffers and downlights to be fixed in ceilings, add to the reasons for the increased sales of luminaires overtime. • Despite being expensive then LED lamps, the modern concept of LED luminaires became popular with the modern techniques and the increased demand of the customers for new products in the LED market. Source: Ken Research Analysis

US LED LIGHTING MARKET SEGMENTATION

Figure 6-1: US LED Lighting Market Segmentation by Type of LEDs (Lamps/Luminaires) on the Basis of Revenues in Percentage, 2014-2016

100.0%

Percentage (%)

80.0%

40.2%

40.7%

48.0%

59.8%

59.3%

52.0%

2015

2016

60.0%

40.0%

20.0%

0.0%

2014

Luminaires

Lamps Source: US Energy Department, Ken Research Analysis

Table 6-2: US LED Lighting Market Segmentation by Type of LEDs (Lamps/Luminaires) on the Basis of Revenue in USD Million, 2014-2016

Type of LED

2014

2015

2016

Lamps Luminaires Total

2,279.5 1,530.4 3,809.9

3,228.7 2,215.0 5,443.7

3,896.9 3,597.2 7,494.1

Source: US Energy Department, Ken Research Analysis

Â© Licensed product of Ken Research; should not be copied

US LED LIGHTING MARKET SEGMENTATION

BY TYPE OF LAMPS, 2016 Table 6-3: Rationale and Description for US LED Light Market Segmentation by Type of Lamps, 2016

Segment Rationale • The traditional use of incandescent bulbs is being replaced by LED reflectors to a great extent, making this segment generate the maximum revenue among all types of LED lamps available in the US. • LED reflectors differ from other conventional lights in a way that they are used to reflect light in a particular direction. Reflector LED lamps put approximately double the amount of light on the subject as General Service of same wattage. • Major end users applications for LED reflectors are found in showrooms LED and floodlights for providing more diffused light. LED reflectors contributed Reflectors 38.0% to the revenues generated by from the sale of LED lamps in the US during 2016. • Having a life span of 20 years and being more environment friendly for producing less heat are the major reasons behind their rising acceptability by the US population. • A19 LED reflectors are among the most demanded LED lights by the people of the US as these lights are meant for multi-purpose use and their easy installation capabilities provides an edge to these lights to be installed in almost all types of fixtures. • The overall lighting market of the US, which was traditionally driven by the use of fluorescent tube lights, witnessed a change with LED tubes making a positive impact in the market, contributing 35.0% of the revenue to the total market for LED lamps in 2016. • Considered to be more efficient in terms of saving energy, LED tubes have the capabilities of full dimming, unlike that of the traditional lighting techniques. LED • Rising awareness among people about the environment made them shift to Tubes LED tubes which are mercury free and emit least or no radiations and are thus safe for the human body. • LED tubes have a lifespan of 50,000 hours as against 30,000 hours of fluorescent tubes available in the market. • Apart from the reason of being environment friendly, they are widely accepted for the fact that the life of LED tubes is not affected by turning them on and off on continuous basis. • Other LED lamps in the form of typical bulbs and lights meant for easy Other installation purposes are widely acceptable by the US population. LED • These LED lamps include A-Lamps, MR16 lamps, T-lamps and other similar Lamps LED lights which contributed 27% to the total revenues of LED Lamps market. Source: Ken Research Analysis

US LED LIGHTING MARKET SEGMENTATION

Figure 6-2: US LED Light Market Segmentation by Type of Lamps (LED Reflectors/LED Tubes/Other LEDs) on the Basis of Revenue in Percentage (%), 2016

27%

38%

LED Reflectors LED Tubes Others LED Lamps

35% Source: US Energy Department, Ken Research Analysis Other LED Lamps include A-Lamps, MR16 lamps, T-lamps and other similar LED lights Table 6-4: US LED Light Market Segmentation by Type of Lamps (LED Reflectors/LED Tubes/Other LEDs) on the Basis of Revenue in USD Million, 2016

Type of Lamps LED Reflectors LED Tubes Other LED Lamps Total

Revenue (USD Million) 1,480.8 1,363.9 1,052.2 3,896.9

Source: US Energy Department, Ken Research Analysis

BY TYPES OF LUMINAIRES, 2016 Table 6-5: Rationale and Description for US LED Lighting Market Segmentation by Type of Luminaires, 2016

Segment

Rationale

Downlights

• LED downlights are one of the earliest applications for solid-state lighting in general illumination and became largely viable in 2007 with the release of the Cree LED LR6 recessed downlight. In addition to its superior efficacy of 54 lm/W the new products’ high lumen output and quality of light made it the first adequate downlight substitute for incandescent and CFL reflector lamps in the lighting industry. • The increasing use of LED downlights for both residential and commercial purposes has made this segment dominate the LED luminaires market with revenues of USD 1,079.2 million during 2016. • Considered to be more stylish and modern as per the latest technology, LED downlights are primarily used as ceiling lights. • The variations in designs and sizes of LED downlights helped the overall market to drive due to the increasing sales of downlights for housing sector in the US • These lights were originally intended for directional lighting applications, but have become commonly used for ambient lighting in both residential and commercial buildings. These fixtures can be recessed or surface mounted and has become popular because they are inexpensive and can provide inconspicuous ambient lighting for most room types. © Licensed product of Ken Research; should not be copied

Segment

Troffers

Roadway Fixtures

Outdoor Area Lights

Other Luminaires

US LED LIGHTING MARKET SEGMENTATION

Rationale • Lighting fixtures in ceilings were traditionally installed with fluorescent lights which have changed to the installation of LED lights in the present scenario. • Troffers fit perfectly inside the ceilings to accommodate the LED lamps and are more preferred for commercial uses over residential purposes. • LED troffers compete with fluorescent troffers in terms of efficacy as well as lighting quality issues such as glare, light distribution, visual appearance, and color quality • The latest change of plastic troffers with metal grids to fix the LED lights attracted people towards the new designs of the perfectly fit frames, thereby helping this segment to generate revenue of 15.0% to the total revenue of luminaires in 2016 • LED troffers are increasingly competitive with incumbent technologies with respect to light output levels and light distribution, and are increasingly able to provide similar or better color characteristics and comparable or better luminaire efficacies. • The increasing use of LED lights over fluorescent lightings has shaped the market in positive way and LED luminaires fixtures are even preferred for both residential streets and major highways in the US • LED luminaires are particularly advantageous in street lighting applications because they are better directional light sources, and exhibit longer lifetimes. • Roadway luminaire fixtures contributed 14% to the total revenue generated from the sales of all types of luminaires in the market during 2016. • Various photometric options for meeting the needs of renovation and construction projects of streets and highways have fuelled the sales of roadway LED fixtures in the US. • LED lights in the outdoor areas offer high quality illumination and are typically used for industrial yard lightings, parking lot lightings, sports grounds lightings, billboards lightings and other general outdoor areas. • The high illumination of LED lights present in outdoor lighting fixtures provide effective security and safety and are thus preferred to other lights in open areas. • Outdoor lighting fixtures have posted revenues worth USD 323.7 Million in the overall market for LED luminaires in 2016. • The demand for luminaires has increased over the recent past due to the wide acceptability of LED lights by both commercial and residential sectors of the US. • Apart from the renowned lighting fixtures, other luminaires which are demanded by the population of the US include Accent and Track fixtures, pendants, linear fixtures and other related fixtures particularly meant to enhance the lighting quality of the lamp installed. • Luminaires differ as per the sizes and the places where they are to be installed and their availability in wide variety and prices. This has made this segment contribute 32% to the revenue from sales of LED luminaires in the US lighting market in 2016.

Source: Ken Research Analysis

US LED LIGHTING MARKET SEGMENTATION

Figure 6-3: US LED Lighting Market Segmentation by Type of Luminaires (Downlights, Troffers, Roadway Fixtures, Outdoor Area Lights and Other Luminaires) on the Basis of Revenue in Percentage (%), 2016

32%

30% Downlights Troffers Roadway Fixtures Outdoor Area Lights

15%

Other Luminaires

14% Source: US Energy Department, Ken Research Analysis Others includes Suspended Pendants, Track Lights, High Bay, Canopies, Wallpacks, Soffits, floodlights and others Table 6-6: US LED Lighting Market Segmentation by Type of Luminaires (Downlights, Troffers, Roadway Fixtures, Outdoor Area Lights and Other Luminaires) on the Basis of Revenue in USD Million, 2016

Type of Luminaires Downlights Troffers Roadway Fixtures Outdoor Area Lights Other Luminaires Total

Revenue (USD Million) 1,079.2 539.6 503.6 323.7 1,151.1 3,597.2

Source: US Energy Department, Ken Research Analysis Table 6-7: LED Downlights Energy Consumption and Savings Potential in the US, 2012

Particulars Units Installed Total Energy Consumption LED Energy Savings Potential LED Energy Savings

Installation and Savings 5.5 Million 36.8 Terawatt Hours 0.9 Terawatt Hours 26.8 Terawatt Hours

Source: US Department of Energy, Ken Research Analysis

Â© Licensed product of Ken Research; should not be copied

US LED LIGHTING MARKET SEGMENTATION

Table 6-8: LED Troffers Energy Consumption and Savings Potential in the US, 2012

Particulars Units Installed Total Energy Consumption LED Energy Savings Potential LED Energy Savings

Installation and Savings 0.7 Million 228.6 Terawatt Hours 0.1 Terawatt Hours 110.4 Terawatt Hours

Source: US Department of Energy, Ken Research Analysis Table 6-9: LED Streetlights Energy Consumption and Savings Potential in the US, 2012

Particulars Units Installed Total Energy Consumption LED Energy Savings Potential LED Energy Savings

Installation and Savings 1.0 Million 43.5 Terawatt Hours 0.3 Terawatt Hours 22.9 Terawatt Hours

Source: US Department of Energy, Ken Research Analysis

BY APPLICATION OF LED, 2014-2016 Table 6-10: Rationale and Description for US LED Lighting Market Segmentation by Application of LED, 2014 - 2016

Segment

Rationale

• Directional LED lights are typically used to emphasize on a particular object by way of a single spotlight. However, the overall LED market also witnessed increasing sales of omni-directional LED lights which focuses on multiple directions to light a particular area • Directional lamps are commonly used for architectural lighting in spaces including households, retail displays, restaurants, museums, and office buildings. LED • Directional lamps are predominately reflector type and include incandescent reflector (R), Directional bulged reflector (BR), halogen parabolic aluminized reflector (PAR), CFL reflector, and their qualified LED replacements. • In particular, the increased demand for directional LEDs by shopping malls to showcase their products and their use in flood lights, made this segment dominate the LED market with revenue share of 37.0% in the overall sales of LED lights in the US.

Segment

US LED LIGHTING MARKET SEGMENTATION

Rationale

• A-type lamps include all A-series lamp shapes and are considered the classic type of light bulb that has been used for general purpose lighting for over 100 years. These lamps have a medium screw base and typically have a pear-like shape. CFLs with a spiral/ twister or mini-spiral/twisters shape are also included in this section • LED A-type replacements have been offered for the past several years, and became broadly available to residential consumers starting in late 2009 when The Home Depot began offering a select number of LED lamp products. Now in 2013, Home Depot offers 56 LED A-type options in-stores and on-line. LED A-type replacement lamps can offer energy savings and lamp lifetimes beyond that of CFLs, with efficacies reaching over 90 lm/W • The overall lighting market in the US has evolved with the acceptance of A-Type LEDs over standard fluorescent bulbs. LED A-Type • Being the most common form of LED lightings, A-Type LEDs catered well to the demands of people using lights for indoor purposes. • Their usage in downlights and other LED fixtures makes people recognize A-Type LED lights more, which is the major reason behind the popularity of this segment. • A-Type LEDs generated revenues worth USD 1,423.9 million in the LED lighting market of the country. • Despite their wide acceptability, there had been a low demand for this segment due to the implementation of Energy Independence and Security Act (EISA), 2007 which called for 25.0% increase in efficiency of all lamps • Currently, 19 utilities and energy efficiency organizations from across North America have established rebates, incentives, and other promotions for the purchase of the Philips L Prize winning A-type LED lamp to help ensure that it gets into the hands of consumers. • Being the most common LED lights which are demanded by commercial sector in the US, LED linear fixtures have been successful in replacing fluorescent tubes in corporate offices to a large extent. LED Linear • Expanding corporate sector in the US augmented the demand for LED linear fixtures to Fixtures be installed in offices, thereby contributing significant amount to their sales during 2016. • Varied sizes from a foot to 8 feet as per the use and the advantage of being considered as the long life lighting source added to their total sales, thus making LED linear fixtures mark revenue of 13.0% in 2016. • Typically used to illuminate decks, walkways, driveways, steps and building architecture, floodlights and wall packs are common applications for installing building exterior LED lights. Building Exteriors • The distinguishing feature of color tunability to match the building architecture made them an ideal choice for both residential and commercial sectors, making this segment contribute 11.0% of the revenue in 2016. • Decorative lamps and luminaires have been significant by their use in commercial and residential sectors of the US over the recent past. • Freedom of designs along with saving energy has made this segment more popular over regular CFLs which are not suited for decorative purposes. LED • Additionally, the dimming requirements and high color quality provided by these Decorative decorative LEDs added to their revenues of USD 599.5 Million in 2016 • Unlike A-type and directional lamps, decorative lamps are largely exempt from the energy efficiency standards set by EISA 2007 and little incentive has existed to motivate the transition away from incandescent technology. © Licensed product of Ken Research; should not be copied

Segment

US LED LIGHTING MARKET SEGMENTATION

Rationale

• The low height of ceilings in parking garages demanded LEDs with control systems to emit lights in large area. • The lighting control potential of LEDs with proper dimming requirements as per the user made these lights significant to be used in parking spaces ahead of HID lamps. • LEDs used in parking garages contributed 4% to the revenues of LED lights market in the US. LED • Parking garages and lots face unique issues concerning their lighting. The near constant Parking vehicle traffic in garages creates particularly harsh operating conditions, with high levels of Garage vibration. • Given these operating conditions, the type of lighting used for parking lots closely mimics the technologies used for streetlight. This application is dominated by HID light sources such as mercury vapor, high pressure sodium, and metal halide lamps because they offer high efficacy, operate effectively for a wide temperature range, and produce high lumen output enabling them to be mounted on widely spaced poles • LEDs used in luminaires installed on roads solve the issue of visibility for drivers and also illuminate outdoor pedestrian walkways. • Durability and their excellence in directional light sources have made Roadways LEDs Area/ generate revenue of USD 187.4 Million in 2016. Roadway • Long operating hours of roadways LEDs makes these lights three times more lasting than LED HID systems installed on roads and are thus preferred by authorities to use them for street and highway lighting purposes. For instance, Los Angeles installed over 170,000 LED streetlights in 2015. • Focusing in a typical direction for a limited area requires the use of LED small directional lights in the market. • Small directional LED lights are usually installed in limited qualities to emit lights that can LED Small act as a path for the people. For instance, these LEDs are commonly used in auditoriums Directional and theatres in Exit boards and along the pathway to show walking directions to the people. • The revenue contribution of such lights in the overall LED lighting market of the country inclined to USD 172.4 million in 2016 from 112.0 million in 2014. • Despite being similar to street lighting LEDs, the lights used in parking lots acquired a low share in revenue due to the ownership of parking spaces in private hands, wherein halogen lamps are used to light up the area. Parking • Improvement in light utilization is the distinguishing feature provided by parking lot LEDs Lot LED to the users which has made this segment generates 2% of the revenue in 2016. For instance, a recent parking lot using LED fixtures demonstrated 66% reduction in electricity usage with more light being provided in the parking space. • Preferred to illuminate large indoor spaces including warehouses and retail stores, low bay and high bay LED lights have surpassed the use of HID lamps which dominated the market traditionally. • Low bay fixtures are installed in ceilings up to the height of 20 feet whereas for LED Low/ installations greater than 20 feet, high bay LEDs are used. High Bay • With over 4,000 listed high and low bay LED luminaires, 55% emit over 15,000 lumens which are sufficient to light up the large indoor spaces. • High and Low Bay LED lights contributed 1.2% revenue to the total revenue earned by sales of LED lights in 2016. Source: Ken Research Analysis © Licensed product of Ken Research; should not be copied

US LED LIGHTING MARKET SEGMENTATION

Figure 6-4: US LED Lighting Market Segmentation by Application of LED on the Basis of Revenue in Percentage (%), 2014 2016 2.2%

2.9% 2.7% 1.6%

100.0%

Percentage (%)

84%

2.3% 2.0% 1.2%

2.3% 1.4% 3.0% 3.0%

2.5% 4.0%

7.2%

8.0%

9.9%

9.7%

11.0%

8.4%

12.7%

13.0%

14.9%

21.8%

19.0%

43.5%

36.6%

37.0%

2015

2016

3.7% 2.9% 9.6%

68%

52%

36%

20% LED Directional LED Parking Garage

2014 LED A-Type

LED Linear Fixtures

Area/Roadway LED

Building Exterior

LED Small Directional

LED Decorative

Parking Lot LED

LED Low/High Bay Source: US Energy Department, Ken Research Analysis Table 6-11: US LED Lighting Market Segmentation by Application of LED on the Basis of Revenue in USD Million, 2014 - 2016

LED Type

2014

2015

2016

LED Directional LED A-Type LED Linear Fixtures Building Exteriors LED Decorative LED Parking Garage Area/Roadway LED LED Small Directional Parking Lot LED LED Low/High Bay Total

1656.1 566.8 318.8 377.0 364.8 111.7 139.2 112.0 102.4 61.1 3,809.9

1992.9 1189.0 693.2 528.0 390.0 165.2 165.0 119.0 125.4 76.0 5,443.7

2772.8 1423.9 974.2 824.4 599.5 299.8 187.4 172.4 149.9 89.9 7,494.1

Source: US Energy Department, Ken Research Analysis

Â© Licensed product of Ken Research; should not be copied

US LED LIGHTING MARKET SEGMENTATION

Table 6-12: Prices of Types of LEDs in USD, 2011-2015

LED Type

2011

2012

2013

2014

2015

LED Directional LED A-Type LED Linear Fixtures Building Exteriors LED Decorative LED Parking Garage Area/Roadway LED LED Small Directional Parking Lot LED LED Low/High Bay

55.0 40.0 95.0 N/A 95.0 N/A 95.0 100.0 N/A 90.0

39.0 27.0 66.0 N/A 75.0 N/A 72.0 73.0 N/A 68.0

30.0 20.0 60.0 160.0 55.0 24.0 65.0 55.0 70.0 58.0

21.0 13.0 53.0 130.0 38.0 17.0 58.0 40.0 64.0 47.0

15.0 10.0 43.0 120.0 26.0 14.0 50.0 34.0 57.0 40.0

Source: US Department of Energy, Ken Research Analysis Table 6-13: LED Directional Lamps Energy Consumption and Savings Potential in the US, 2012

Particulars Units Installed Total Energy Consumption LED Energy Savings Potential LED Energy Savings

Installation and Savings 11.4 Million 18.7 Terawatt Hours 2.3 Terawatt Hours 16.7 Terawatt Hours

Source: US Department of Energy, Ken Research Analysis Table 6-14: LED Parking Garage Consumption and Savings Potential in the US, 2012

Particulars Units Installed Total Energy Consumption LED Energy Savings Potential LED Energy Savings

Installation and Savings 0.4 Million 25.7 Terawatt Hours 0.3 Terawatt Hours 13.8 Terawatt Hours

Source: US Department of Energy, Ken Research Analysis Table 6-15: LED Parking Lot Consumption and Savings Potential in the US, 2012

Particulars Units Installed Total Energy Consumption LED Energy Savings Potential LED Energy Savings

Installation and Savings 0.2 Million 34.2 Terawatt Hours 0.2 Terawatt Hours 21.8 Terawatt Hours

Source: US Department of Energy, Ken Research Analysis

Â© Licensed product of Ken Research; should not be copied

US LED LIGHTING MARKET SEGMENTATION

BY USAGE, 2016 Table 6-16: Rationale and Description for US LED Lighting Market Segmentation by Usage, 2016

Segment

Indoor

Outdoor

Rationale • Adaptability of people has increased towards using LED lights in residential, commercial and industrial sector overtime. • The demand for LED lights increased in the commercial and industrial sector as these consumers are typically concerned with the lifetime cost associated with the lighting product. LED lights being more efficient and long lasting cater well to the customers in this sector. • The increasing awareness about energy saving resources in the US further boosted the demand of residential sector for indoor LED lights, making this segment contribute USD 6,032.8 Million to the total revenue earned by the sales of LED lights in the country • Reduction in price of LEDs, along with the installation costs has made LEDs much more economical for households in to use LEDs in indoor areas. • LED lights specialize in indoor areas as they are resistant from water vapor and dust due to their low heat emitting qualities and the small size, which does not allow such substances stick to the installed lights. Thus, the level of ingress protection, which is required by indoor light applications, is achieved by such heat resistant LED lights. • Consisting of parking lightings, area and roadway lightings, exterior building lightings and other open area lightings, outdoor LED lights serve the propose of creating a sense of personal security by illuminating larger areas. • Outdoor LED lights are considered important for the fact that they help in attracting people towards a particular space and this distinguishing feature to emit more light in open places is the major reason responsible behind generating 19.5% of the revenue in the overall LED lighting market of the US. • Laws and statutory mechanisms introduced by the government to reduce carbon dioxide emissions are well catered by the use of LED lights in the outdoor areas particularly for street lights which are installed in large quantities. Additionally, the increasing use of LED lights does not involve the use of mercury and other chemicals in lighting techniques which makes such lights easier to recycle. • Litom Solar Lights Bright, Dusk-to-Dawn LED, Solar Motion Sensor LED, LED Barn Light and Barbecue Grill Light are the top selling LED lights in the US which are typically used for street and area lighting.

Source: Interviews with the US LED Lighting Market Professionals, Ken Research Analysis

US LED LIGHTING MARKET SEGMENTATION

Figure 6-5: US LED Lighting Market Segmentation by Usage (Indoor/Outdoor) on the Basis of Revenue in Percentage (%), 2016

19.5%

80.5%

Indoor LED Lights Outdoor LED Lights Source: Interviews with the US LED Lighting Market Professionals, Ken Research Analysis US Indoor LED Market: US Indoor LED market includes the applications of LED in residential, commercial and industrial sector within the US US Outdoor LED Market: US Outdoor LED market includes the applications of LED in building exterior, Area/Roadway, Parking lot and Parking garage within the US

Table 6-17: US LED Lighting Market Segmentation by Usage (Indoor/ Outdoor) on the Basis of Revenue in USD Million, 2016

Usage of LED Indoors Outdoors Total

Revenue (USD Million) 6,032.8 1,461.4 7,494.2

Source: Interviews with the US LED Lighting Market Professionals, Ken Research Analysis

Â© Licensed product of Ken Research; should not be copied

US LED LIGHTING MARKET SEGMENTATION

BY INDOOR LEDS, 2016 Table 6-18: Rationale and Description for US LED Lighting Market Segmentation by Indoor LEDs on the Basis of Revenues, 2016

Segment

Commercial

Residential

Industrial

Rationale • Outdoor applications are among the most demanding areas for LEDs and LED light sources, because they are subject to or affected by many, sometimes conflicting conditions. For instance, they may be affected by temperature, radiation, moisture, rain, dust, chemicals, gases and other natural phenomena. • Offering plethora of benefits in comparison to traditional lights including incandescent and CFLs, LED are regarded as most economical ways of lighting by the commercial sector of the US. • Despite the higher initial cost of installation which is added to the expenses of the companies opting LED lights, this lighting technology is preferred by the commercial sector for its longer shelf life and energy saving benefits. • LED Lights offers commercial end users with a positive return on investment. • LED lights in commercial sector have dominated the market for indoor purposes dominated the market with 52.2% revenue in 2016. • Solar Lights URPOWER 2-in-1, Litom Solar Lights Bright 20LED, Mpower Solar Lights and Brightech Ambience Pro LED lights are among the most popularly used commercial LEDs as of March 2017. • Residential sector of the US was viewed as a potential market for increasing sales of LEDs. • Surpassing the use of fluorescent tubes and bulbs which emit more heat, LED lights became a preference for the population in US. • Apart from the advantages of energy saving, LED lights are preferred by the residents for their designs and colors which differ significantly from traditional lighting technology. • Increasing demand for LED lights by residents of the US made this segment contribute USD 2,622.9 million revenue to the overall indoor LED lighting in 2016 Recessed downlights are the most commonly used LEDs in residential sectors and are installed in kitchens, hallways, and bathrooms. • It has been estimated by the Department of Energy that at least 500 million recessed downlights have already been installed in homes of the US and about 20 million lights are sold each other. • The ability of LED lights to work properly in rugged environments makes these lights an ideal choice for the industrial sector in the present scenario. • Unlike HID and fluorescent lights which require high maintenance cost of magnetic ballasts, LEDs are semiconductors containing electronic drivers which do not require maintenance. • Lack of mercury in LED lights is one of the major reasons responsible behind their choice by the industrial sector as this allows them to work in high temperature environments. • Additionally, the anti-glare feature which matches the color temperature requirements of the industrial sector made this segment contribute 4.3% revenue to the overall revenue of LED lights used indoor in the US in 2016. • One of the key benefits of using LED lighting for industrial applications is that welldesigned LED drivers don’t fail during the usable lifetime of an LED. It is unlikely that a driver or any other component would need to be replaced

Source: Ken Research Analysis © Licensed product of Ken Research; should not be copied

US LED LIGHTING MARKET SEGMENTATION

Figure 6-6: US LED Lighting Market Segmentation by Indoor LEDs (Commercial, Residential and Industrial) on the Basis of Revenues in Percentage (%), 2016

4.3% 52.2%

Commercial Residential Industrial 43.5%

Source: Interviews with the US LED Lighting Market Professionals Table 6-19: US LED Lighting Market Segmentation by Indoor LEDs on the Basis of Revenue in USD Million, 2016

Indoor LEDs Commercial Residential Industrial Total

Revenue (USD Million) 3,147.5 2,622.9 262.3 6,032.7

Source: Interviews with the US LED Lighting Market Professionals Table 6-20: Best LED Light Bulbs for Residential Purposes, March 2017

Type of LED Lighting in Residential Sector Osram 60W Replacement Ultra LED GE 16W LED (100W Replacement) Philips 60w Replacement LED GE Reveal BR30 LED Philips Scene Switch 60W Equivalent LED Cree 13.5W (60W) TrueWhite Series Soft White LED Bulb

Price (USD) 9.89 10.69 10.47 7.16 27.48 10.01

Source: Cnet.com, Ken Research Analysis

Â© Licensed product of Ken Research; should not be copied

US LED LIGHTING MARKET SEGMENTATION

Figure 6-7: Housing Units in the US, 2014 - 2016

136 135.6

Million

135

134.7

134 133.3 133

132

2014

2015

2016

Source: Statista, Ken Research Analysis Figure 6-8: Available Industrial Space in the US in Thousand Square Meters, 2014 - 2016

185,000

Thousand Square Meters

182,354.0

178,750 175,096.0 172,500 168,408.0 166,250

160,000

2014

2015

2016

Source: Statista, Ken Research Analysis

Â© Licensed product of Ken Research; should not be copied

US LED LIGHTING MARKET SEGMENTATION

Figure 6-9: Commercial Office Space in the US in Million Square Feet, 2015 - 2016

49.0

Million Square Feet

38.4

2015

2016

Source: Statista, Ken Research Analysis

Â© Licensed product of Ken Research; should not be copied

US LED LIGHTING MARKET SEGMENTATION

BY APPLICATION OF OUTDOOR LEDS, 2016 Figure 6-10: US LED Lighting Market Segmentation by Application of Outdoor LEDs on the Basis of Revenue in Percentage (%), 2016

32%

30%

14%

Building Exterior Parking Garage Area/Roadway Parking Lot

Source: Interviews with the US LED Lighting Market Professionals, Ken Research Analysis Table 6-21: US LED Lighting Market Segmentation by Application of Outdoor LEDs on the Basis of Revenues in USD Million, 2016

Outdoor Applications Building Exterior Parking Garage Area/Roadway Parking Lot

Revenues (USD Million) 824.4 299.8 187.4 149.9

Key Takeaways • Infrastructural developments in the US wherein LED lights are used to illuminate the building architecture as they can perfectly match with the colors of the walls made LEDs for building exteriors dominate the market of outdoor LED lights in 2016. • The reason responsible behind the limited use of LED lights in parking lots was the fact that these spaces are owned by private sectors or individuals which typically use HID lamps to light up the area, as against the growing usage of LEDs for roadway fixtures owned by the government sector in the country. Additionally, these lights are more expensive than traditional lighting techniques used in parking lots. People still prefer fluorescent lights in such areas where not much of the bulbs are required and hence to save the cost of installation, the use of LED is restricted. Source: US Energy Department, Ken Research Analysis

US LED LIGHTING MARKET SEGMENTATION

BY DISTRIBUTION CHANNELS, 2016 Table 6-22: Rationale and Description for US LED Lighting Market Segmentation by Distribution Channels, 2016

Segment

Rationale

• The rising demand for LED lights in the US has been a major reason responsible behind the wide network of electrical wholesalers which caters to the requirements of residential, commercial and industrial sectors across the country. • Typically meant for providing LED lights in large quantities, this segment leads in terms Electrical of revenues generated by various distribution channels of LED lighting market in the US Wholesalers during 2016. • Wholesalers for LED lights cater to the demands of regional retailers, real estate developers and other customers which require lights in bulk quantities. • Electrical wholesalers have an approximate margin of 10% on the sales of LEDs. • The country’s leading online and offline store for furnishing and home accessories is among the largest providers of LED lights in the US. • Home Depot serves the lighting needs of the population with wide variety of LED lights Home under different price range available on the online platform • Home Depot (HD) reported record results in fiscal 2016. Sales reached a new high of Depot USD 88.5 billion in fiscal 2016, up 6.4% year-over-year (or YoY). • Home center contributed 10% to the revenues generated by different channels from the sales of LED lights in the country in 2016. • Professional business entity, Energy Service Company (ESCO), provides a broad range of energy solutions by way of designer and energy efficient LED lights across all sectors of the country. • The products offered by ESCO are often labeled under ESPC. • ESCO conducts energy saving programs to create awareness among the people about the benefits of shifting to energy efficient techniques, which has made this segment ESCO contribute USD 599.5 million to the revenues of during 2016. • ESCO received its first LED street lighting conversion orders by getting in a five year partnership with Connecticut Conference of Municipalities (CCM) under the Municipal Street Lighting Conversion Program in 2015. This enabled municipalities to purchase LED lights for street lighting purposes from ESCO. • Organizations involved in electricity billings of various sectors further tied up with the Government wherein these LED lights can be purchased at subsidized rates. • This is the most accepted method by the government to make people shift to energy Utilities saving sources in the country • The sale of LED lights from utilities generated USD 524.6 Million in 2016. • Duke Energy, which is an electric utility company based in North Caroline was the top utility company of the US in 2016 with market value of USD 53.1 Billion. • The attractive infrastructure of lighting showrooms has supported the increasing sales of LED lights from this channel, which primarily caters to the requirements of residential sector in the US Lighting • Lighting showrooms are the most accepted retail channel by the household segment of Showrooms the US and thus the growing residential sector has made them contribute 6% to the total revenues from various channels of LED lighting sales in the country in 2016. • Artemide, Collier West, FLOS and Lightology are among the top LED lighting stores of the country.

US LED LIGHTING MARKET SEGMENTATION

Segment

Rationale

• Catering typically to the real estate and other commercial sectors in the US, LED light manufacturers directly sell to the customers which have more demand or are in contract with them. • The leading manufacturers of LED lights in the US promoted their products through Direct Sales direct sales campaign, offering latest products at introductory prices, thereby having more potential customers for the company. • Direct Sales of LED lights by the manufacturers to the customers generated USD 374.7 Million in 2016. Source: Interviews with the US LED Lighting Market Professionals, Ken Research Analysis Figure 6-11: US LED Lighting Market Segmentation by Distribution Channels (Electrical Wholesalers, Home Depot, ESCO, Utilities, Lighting Showrooms, and Direct/National Accounts) on the Basis of Revenue in Percentage, 2016

5% 6%

64%

Electrical Wholesalers Home Depot ESCO

Utilities Lighting Showrooms

10%

Direct/National Account

Source: Interviews with the US LED Lighting Market Professionals, Ken Research Analysis Table 6-23: US LED Lighting Market Segmentation by Distribution Channels (Electrical Wholesalers, Home Depot, ESCO, Utilities, Lighting Showrooms, Direct/National Accounts) on the Basis of Revenue in USD Million, 2016

Type of LED Lighting in Residential Sector Electrical Wholesalers Home Centers ESCO Utilities Lighting Showrooms Direct/National Account Total

Price (USD) 4,796.2 749.4 599.5 524.6 449.7 374.7 7,494.1

Source: Interviews with the US LED Lighting Market Professionals, Ken Research Analysis

TRADE SCENARIO FOR THE US LED LIGHTING MARKET BY EXPORTS, 2011-2015 Manufacturing of LEDs in the US has increased over the recent past due to the rising awareness for energy saving modes of electricity on a global scale. A part of LED lights manufactured in the US are exported to other countries along with the fact that a significant production also caters to the domestic demand.

other economies as a result of Free Trade Agreements which encouraged trade between countries due to the elimination of import duties and tariff lines across various items.

However, the exports in LED lights of the US declined from USD 1,065.2 million in 2014 to USD 1,020.3 The total value of LED lights exported from Million in 2015. The major reason responsible behind the US to other countries was evaluated to the declining exports was the expansion of Chinese be USD 796.5 million during 2011 and this lighting markets which catered to the global needs figure further inclined to USD 1,020.3 million at lower prices. Chinese lighting market marked a 22.42% year on year growth during the first quarter during 2015. of 2015. The US majorly exports such lighting technologies to Figure 7-1: US LED Lighting Export Market on the Basis of Export Value in USD Million, 2011-2015

1,200 1,065.2

Export Value (USD Million)

1,000

800

895.0

916.8

2012

2013

1,020.3

796.5

600

400

200

2011

2014

2015

Source: US International Trade Commission, Ken Research Analysis

ÂŠ Licensed product of Ken Research; should not be copied

TRADE SCENARIO FOR THE US LED LIGHTING MARKET

Figure 7-2: US LED Lighting Export Market on the Basis of Export Volume in Million Units, 2011-2015

12,000

9,775.9

Export Volume (Million Units)

10,000

10,315.9 8,980.0

8,000 6,934.9 6,000

4,000

3,041.8

2,000

2011

2012

2013

2014

2015

Source: US International Trade Commission, Ken Research Analysis Figure 7-3: US LED Lighting Export Market by Major Destinations (Hong Kong, Mexico, Singapore and others) on the Basis of Export Value in Percentage (%), 2015

2.1% 1.5% 2.1%

Hong Kong

9.1% 39.6%

5.9%

Mexico Singapore Germany Netherlands

17.7%

Canada China Other Countries 22.1%

Source: US International Trade Commission, Ken Research Analysis Note: Other Countries include France, Japan, United Kingdom, Switzerland, Taiwan, Saudi Arabia, Italy and Malaysia

ÂŠ Licensed product of Ken Research; should not be copied

TRADE SCENARIO FOR THE US LED LIGHTING MARKET

Table 7-1: US LED Lighting Export Market by Major Destinations (Hong Kong, Mexico, Singapore and others) on the Basis of Export Value in USD Million, 2015

Export Value (USD Million), 2015 Hong Kong 403.8 Mexico 225.5 Singapore 180.3 Germany 60.4 Netherlands 21.7 Canada 21.0 China 15.0 Others 92.7 Total 1,020.4 Key Takeaways • Hong Kong is a free port. There is no customs tariff on goods imported into Hong Kong. Hong Kong remained the largest importer of LED lights from the US during the review period. • After Hong Kong, Mexico is one of the major export destinations for the US due to the North American Free Trade Agreement (NAFTA), which has played a crucial role in supporting the sales of Made-in-America products from the US to Mexico. • Free Trade Agreement (FTA) between the US and Singapore strengthened the bilateral trade relations, which made Singapore import high quality LED lights manufactured in the advanced technological environment of the US. Major Export Destinations

Source: US International Trade Commission, Ken Research Analysis Note: Other Countries include France, Japan, United Kingdom, Switzerland, Taiwan, Saudi Arabia, Italy and Malaysia

TRADE SCENARIO FOR THE US LED LIGHTING MARKET

BY IMPORTS, 2011-2015 and raised import standards of the US in 2013, the import of LED lights from China witnessed a downfall. The International Lighting Standard IEC62560-2011 states the lighting fixtures manufactured for normal use should not have contactable live parts after installation and wiring or during replacements of lighting source or starters with lights on, even when not manually operated. LED light users in the US found those live electric parts after the light was put to use. It was in 2014 when the manufacturing of traditional incandescent lights was The total import value of LED lights in the US inclined restricted and the government made efforts to switch from USD 1,204.4 Million in 2013 to USD 1,364.2 people towards the use of LED lights. This raised the Million in 2014. Technological advancements in the imports of Light Emitting Diodes in the US. lighting industry of China and Japan made the US The imports of LED lights further witnessed a increase its import from the countries where low cost rise from USD 1,364.2 Million in 2014 to USD products were available. This helped the importers earn 1,417.9 Million in 2015. Thus, China and Japan more margins on the products sold to the population continued to dominate the import market for of the country. However, due to technological barriers LED lights in the US during the review period. The total import value of LED lights into the country declined from USD 1,250.2 million during 2011 to USD 1,204.4 million during 2013. US manufacturers set up their production base in the country due to a large market and increasing demand for LED lighting. Government efforts and initiatives to create awareness among public towards energy saving modes of electricity urged the local manufacturers to cater to the US population with the available technology in the initial phases of rising demand.

Figure 7-4: US LED Lighting Import Market on the Basis of Import Value in USD Million, 2011-2015

1,450

1,417.9 1,364.2

Import Value (USD Million)

1,370

1,290 1,250.2 1,213.9

1,210

1,204.4

1,130

1,050

2011

2012

2013

2014

2015

Source: US International Trade Commission, Ken Research Analysis

ÂŠ Licensed product of Ken Research; should not be copied

TRADE SCENARIO FOR THE US LED LIGHTING MARKET

Figure 7-5: US LED Lighting Import Market on the Basis of Import Volume in Million Units, 2011-2015

Import Volume (Million Units)

10,000

8,015.6

8,000 7,179.0 6,000 4,766.3

5,122.7

5,657.7

4,000

2,000

2011

2012

2013

2014

2015

Source: US International Trade Commission, Ken Research Analysis Figure 7-6: US LED Lighting Import Market by Major Destinations (China, Japan, Malaysia, Taiwan and others) on the Basis of Import Value in Percentage, 2015

2.6% 2.1% 3.1% 5.3%

China 41.0%

Japan Malaysia Taiwan Korea

18.3%

Germany Other Countries 27.5%

Source: US International Trade Commission, Ken Research Analysis Note: Other Countries include Canada, Thailand, Mexico, Hong Kong, United Kingdom, Philippines, Singapore, Ireland and France

ÂŠ Licensed product of Ken Research; should not be copied

TRADE SCENARIO FOR THE US LED LIGHTING MARKET

Table 7-2: US LED Lighting Import Market by Major Destinations (China, Japan, Malaysia, Taiwan and others) on the Basis of Import Value in USD Thousand, 2015

Import Value (USD Million), 2015 China 581.5 Japan 389.9 Malaysia 260.1 Taiwan 44.4 Korea 36.6 Germany 30.5 Others 70.0 Total 1,413.0 Key Takeaways • The technological advancements in China at cheap prices make it the largest import destination for the US LED lighting market, even though the exports of China to the USA have witnessed a decline due to technological barriers and safety standards of the importing country. • The precision with which LED lights are manufactured in Japan helps the US to import quality products at competitive prices from the overseas market, thus making Japan one of the largest import destinations for the US LED Lighting market. • Malaysia being considered as the Most Favored Nation (MFN), the exports from Malaysia involve lower tariffs than other nations, thus making it a significant import destination for the US. Major Import Destinations

Source: US International Trade Commission, Ken Research Analysis Note: Other Countries include Canada, Thailand, Mexico, Hong Kong, United Kingdom, Philippines, Singapore, Ireland and France

TRADE SCENARIO FOR THE US LED LIGHTING MARKET

IMPORT CHARGES ON LED LIGHTING PRODUCTS, 2011-2015 Figure 7-7: Import Charges Including Insurance and Freight Charges on LED Lighting Products in the US in USD Thousand and Contribution to Overall Import Value in Percentage, 2011-2015

30,000

2.5% 27,807 25,643

25,000 21,963

19,917

20,000

2.0%

18,912 1.6%

1.5%

1.4%

15,000

1.0%

Percentage

USD Thousand

2.1%

10,000 0.5%

5,000

2011

2012

Import Charges

2013

2014

2015

Contribution to Total Import Value (%)

Source: US International Trade Commission, Ken Research Analysis

Â© Licensed product of Ken Research; should not be copied

COST ANALYSIS FOR LED LIGHTING IN THE US MARKET The production of an LED light involves the use of various components. All these components including LED chips, drivers, heat sinks and related parts contribute to the cost of LED light manufactured in the plant. Mechanical, thermal and electrical charges occupy majority share of cost irrespective of the type of LED lamp manufactured.

time and precision is involved in small size LEDs and hence the assembling of large size outdoor LEDs are much cost saving. Other overheads which contribute to the total cost change with the geographical location where the plant is set up and due to various other reasons which at times arise out of uncertainty. Some of the facts about LED Light production are:

The cost of LED package directly depends • Components on the circuit board is often assembled by hand because it’s still too complicated for upon the size of LED lamp to be packed. factory machines Packaging cost thus varies with each type and model of LED light produced. • The actual LED wafer can cost as much as USD 8

a unit The manufacturing of LED lights also requires the use of lenses which are crucial for reflecting the light emitted • The brightest LEDs generate blue light. So in order by LED products. The cost of such optics directly varies to get the more natural white glow, manufacturers with the power of LED and the area within which the typically coat the bulb with yellow phosphor, an light has to be emitted. The cost of optics is highest expensive rare earth metal compound imported in manufacturing an outdoor area lamp. LED drivers from China and chips have to be connected which help in the • LEDs additionally require the use of drivers smooth transition of electric current. Manufacturing to convert energy into electrical current. small size LED lights involve a large share of chips This component alone can cost up to USD 4 and drivers cost as they are more complex to be installed in limited spaces. Assembling cost is also • Although LEDs burn cooler than Edison bulbs, they still need a conducting material to dissipate a significant factor that adds to the overall expenses the heat. The aluminum used to accomplish this of manufacturing LED lights. However, assembly cost can cost as much as USD 3. tends to rise as the size of the LED is reduced. More

COST ANALYSIS FOR LED LIGHTING IN THE US MARKET

Figure8-1: Cost Breakdowns of LED Lights (Outdoor Area Lamps, Interior Downlights and Replacement Lamps) in the US LED Lighting Market on the Basis of Mechanical/ Thermal/ Electrical Charges, Drivers, Assembly, LED Package, Optics and Overheads in Percentage (%), 2015

100.0%

7% 11%

Percentage (%)

80.0%

60.0%

15%

13% 15%

18%

19%

16%

14% 14%

40.0%

20% 41%

45%

20.0%

0.0%

26%

2014

Mechanical/Thermal/Electrical

2015 Driver

Assembly

2016 LED Package

Overhead

Optics Source: Ken Research Analysis

Â© Licensed product of Ken Research; should not be copied

COST ANALYSIS FOR LED LIGHTING IN THE US MARKET

Figure 8-2: Cost Breakdown for LED Package on the Basis of components in Percentage, 2016

22.0%

Epitaxy

30.0%

Wafer Processing

22.0% 29.0% 26.0%

Packaging

26.0% 20.0%

Phosphor 8% 10%

Substrate

7% 0%

10%

15%

20%

25%

30%

Percentage Mid Power

High Power

Source: Ken Research Analysis

Â© Licensed product of Ken Research; should not be copied

DECISION MAKING PROCESS BEFORE PURCHASING LED LIGHTING IN THE US MARKET Table 9-1: Customer Decision Making Process before Purchasing LED Lights in the US

Parameter

Degree of Rationale Importance

Purpose of Usage

High

Power

High

Brand

Medium

Shape and Base of the LED

Medium

• One of the major parameters considered by the customers before purchasing LED lights is the place where such lights are to be installed. The purpose of installing LEDs varies with the area where light has to be emitted. • For instance, government requires LED lights to be installed on roadways whereas individuals may require them to be installed for residential and commercial purposes. Decorative LED lights are demanded to gather traction towards a place or a structure. • Therefore, apart from the energy saving benefits, the purpose of installation plays a crucial role. • The brightness and dimming capabilities of the LED and their colors are considered as a priority by most of the people before making an actual purchase. Higher the watt, higher is the power of the LED installed. • Thus, low watts LEDs are preferred for residential and other indoor purposes whereas; LEDs with higher light emitting capabilities are used for open and outdoor areas. • With number of players operating in the LED lighting market of the US, brand is considered as a crucial parameter by many customers for purchasing an LED light. • Cree, Philips, Osram and other major players are preferred by the customers in the LED lighting market of the US. • LED lights are often purchased depending upon the shape of the bulb to be installed. Spirals, linear and A-shape are mostly preferred by the users. • Customers also select among the pin base and screw base LED lights. These bases are selected as per the shape which will fix in the electrical socket where the light has to be installed.

DECISION MAKING PROCESS BEFORE PURCHASING LED LIGHTING IN THE US MARKET

Parameter

Price of LED

Degree of Rationale Importance • The developed economy of the US does not consider price to be the most important factor for purchasing LED lights. However, there are some segments where price becomes a priority. • In case of bulk orders by corporate houses, price is considered to be important whereas price is not a crucial issue for such section, which use LEDs for residential purpose • Color temperature is measured in degrees Kelvin (K). The color temperature of a light bulb describes how the light appears when an illuminated bulb is looked at directly by the human eye. • Light bulbs that produce a yellowish white light may have a color temperature around 2700K, producing a “warm, cozy feeling.” • As the color temperature increases, the yellowish color of the bulb decreases, and the white or “cooler” color increases. At 5000K or higher, the light color appears bluish white

Low

Color Low Temperature

Source: Ken Research Analysis Table 9-2: Analysis of LED Color Temperature

Color Temperature

Light Color

Mood Created

Uses

2700K 3000K 3500K 4100K 5000K

Warm/Soft White Warm/Soft White Cool/Bright White Cool/Bright White Daylight or Natural

Ambient Personal Calm Warm Friendly Inviting Precise Clean Efficient Daylight Vibrant

6500K

Daylight or Natural

Daylight Alert

Commercial, Hospitality Commercial & Hospitality Light Commercial Garage Commercial Commercial, Industrial and Institution Commercial, Industrial and Institution

Source: Industry Articles

TRENDS AND DEVELOPMENTS IN THE US LED LIGHTING MARKET GROWING MERGERS AND ACQUISITIONS IN THE MARKET With the increased acceptance of LED lights in the country, there have been a rising number of mergers and acquisitions taking place in the overall LED lighting market of the US. Mergers and acquisitions remain a significant trend as the market advances towards

energy saving and intelligent lighting solutions. The organized players in the LED lighting markets of the US try to maintain their market position by acquiring the small players entering the market.

Table 10-1: Latest Acquisitions in US LED Lighting Market, 2015-2016

Date

Acquiring Company

Acquired Company

May 2016

Revolution Lighting Technologies, Inc.

TNT Energy, LLC

March2016

AB Fagerhult

LED-Linear GmbH

March2016

Cortec Group

Chauvet & Sons

March2016

Lumenpulse Inc.

Fluxwerx Illumination Inc.

February 2016

Lumenoptix, Inc.

CeeLite Technologies LLC

Target Description Manufacturing LED lighting products for offices, hospitality, medical and retail applications. Manufacturing LED including interior and exterior LED lamps Manufacturing entertainment lighting products including luminaires and related components. Manufacturing architectural LED lights for institutional and commercial spaces. Developing large area light panels and linear LED retrofit products.

ÂŠ Licensed product of Ken Research; should not be copied

TRENDS AND DEVELOPMENTS IN THE US LED LIGHTING MARKET

Date February 16 January 2016 January 2016 December 2015 December 2015 December 2015 December 2015 December 2015 November 2015 October 2015 October 2015 July 2015

July 2015

June 2015

Acquiring Company

Acquired Company

Target Description

Manufacturing LED support elements. Manufacturing motion Transom Capital Group, HeathCo LLC activated decorative lightings LLC and down light lanterns. Manufacturing and installing Illuminate Boston Vanguard Lighting lighting fixtures. Manufacturing lighting fixtures Acuity Brands Lighting, Inc. Juno Lighting, LLC and related products. Provide lighting solutions by wide area LED lights and Huskie Tools, Inc. Jameson LLC heavy duty LED lights used for construction purposes. Manufacturing customized Flos S.p.A. Lukas Lighting, Inc. lighting products for residential and corporate interiors. Manufacturing LED lighting EcoSense Lighting Inc. Journee Lighting Inc. products. Manufacturing lighting fixtures Lumenpulse Inc. Exenia S.r.l. residential customers, shops, showrooms and galleries. Manufacturing lights for Summer Street Capital commercial and residential ARN Industries, Inc. Partners, L.L.C. sectors with specialty lighting products. Manufacturing flood lights and AB Fagerhult Lighting Innovations (Pty) Ltd other LED lighting products. Manufacturing high output Eaton Corporation plc Ephesus Lighting, Inc. LED lights for sports and entertainment purposes. Manufacturing lighting Corinthian Capital Group, Best Lighting Products, Inc. products used for emergency LLC exit lightings. Manufacturing LED ring Automated Valve & TechniQuip Corporation illuminators, and other LED Equipment Co. lighting products. Manufacturing precision B-K Lighting, Inc. ABS Lighting Co. flood lights and customized luminaries. GoVision LP

Custom Design and Fabrication, LLC

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TRENDS AND DEVELOPMENTS IN THE US LED LIGHTING MARKET

Date

Acquiring Company

June 2015

Gold Ridge Asset Management

SIB Lighting

May 2015

Baird Capital

SloanLED

May 2015

Undisclosed

VISO Inc.

May 2015

Leviton Manufacturing Co., Intense Lighting, Inc. Inc.

April 2015

River Hollow Partners

Macro Energy Services

March 2015

Lumenpulse Inc.

SDL Lighting Inc.

March 2015

Almo Corporation

AF Lighting

February 2015

EnerTech Capital; Emerald Technology Ventures AG; G C & H Investments; TerraLUX, Inc. Generation Investment Management LLP; Crawley Ventures

Manufacturing LED lights for offices, hotels, municipal and retail applications.

Equal Earth, Inc.

Manufacturing commercial LED lighting products for indoor and outdoor lighting.

January 2015

Acquired Company

LED Enviroworks

Target Description Proving energy efficient lighting products and installations. Manufacturing LED lights for spa and refrigeration. Manufacturing decorative lighting fixtures for hotels and other commercial uses. Manufacturing lighting fixtures including downlights and reflectors. Distributing energy efficient lighting systems. Manufacturing LED luminaries for Street lighting. Manufacturing LED lighting products.

Source: Industry Articles

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TRENDS AND DEVELOPMENTS IN THE US LED LIGHTING MARKET

INCREASING APPLICATION OF NON-VISIBLE LED LIGHTS The widespread acceptability of regular white LED lights by the US population has led to the emergence of a new trend wherein companies are now focusing on non-visible LED spectrums including ultraviolet (UV) and infrared (IR) LEDs. In such a competitive environment where different companies charge almost the same price for LEDs, manufacturers are now focusing on special and innovative lighting techniques to boost their profitability.

The gross margins on non visible LEDs are relatively higher than regular white LED lights sold in the market. Despite of some technological barriers to develop such lights, manufacturers prefer IR LEDs to be installed in mobile devices as added value features which their profitability. The usage of UV and IR LEDs has been a significant change that is shaping the LED lighting market of the US.

INCREASING AWARENESS ABOUT ENERGY SAVING The US, being considered as the most developed country of the world has witnessed a positive change in terms of energy saving programs. The Federal Energy Management Program (FEMP) of the US government helps organizations and agencies in achieving their

energy related goals and requirements along with the reduction of greenhouse effects. Many NGOs have tied up with the government to make people aware about the energy conservation techniques, out of which using LEDs is one such way.

LED lights are considered to be 80% more efficient than regular lighting methods used by people. Since they are expensive, they are often offered at subsidized prices with other benefits so that the people can afford and switch to low energy consumption techniques. For instance, corporate tax incentives are provided to the companies in Kentucky if they use LED lights in their offices. People of the US connected with various organizations to make them aware about the other ways in which they can reduce their energy consumption. This has been a significant trend wherein both LED manufacturing companies and

the government are trying to make people know about the positive impacts of using these lights over traditional means. In order to make people aware, the government has also adopted to use LED lights for street lighting purposes. This builds trust among people that the lights are safe and energy efficient as the government is also using the similar technology.

RISING ELECTRICITY PRICES IN THE US There has been a steady increase in the retail electricity prices in the US, owing to rising use of energy in the country.

for commercial and residential use is the major factor responsible behind the steady increase in electricity prices overtime. The rising prices are making people The residential electricity prices witnessed a shift to the use of LED lights which consume less energy than traditional sources of incandescent and 34% rise between 2005 and 2015. fluorescent bulbs, thereby driving the overall LED The increasing demand for electricity in the US both lighting market of the US.

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TRENDS AND DEVELOPMENTS IN THE US LED LIGHTING MARKET

Figure 10-1: Average Retail Electricity Prices in the US in Cents per Kilowatt Hour, 2010-2015

10.5 10.40

10.40

2014

2015

Cents per Kilowatt Hour

10.3 10.10 10.1

9.90

9.9 9.80

9.80

9.7

9.5

2010

2011

2012

2013

Source: US Energy Department, Ken Research Analysis Table 10-2: Comparison of Incandescent bulbs, CFLs and LED lights on the Basis of Cost Incurred

Parameters

Incandescent

CFL

LED

Approximate cost per bulb Average lifespan Watts used No. of bulbs needed for 25,000 hours of use Total purchase price of bulbs over 23 years Total cost of electricity used (25,000 hours at $0.12 per kWh) Total operational cost over 23 years

$1 1,200 hours 60W 21 $21 $180

$2 8,000 hours 14W 3 $6 $42

$8 or less 25,000 hours 10W 1 $8 $30

$201

$48

$38

Source: The Simple Dollar, Ken Research Analysis Note: Lifespan of 25,000 hours is assumed where bulbs are used for three hours a day for 23 years.

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TRENDS AND DEVELOPMENTS IN THE US LED LIGHTING MARKET

DEVELOPMENT OF LIGHTING SALES CHANNELS Lighting agents and retailers are increasing in the US over the recent past. This has augmented the sales of LED lights in almost every region of the country.

Distributors are appointed by the manufacturing company for a particular geographical region which helps the company is expanding its sales network to all sectors. However, the appointed distributors are not allowed to sell the competitorsâ&#x20AC;&#x2122; products. With the increase in number of LED distributors, the entire sales channel is expanded as more agents are hired to create the customer base. The country is witnessing a phenomenal development in the sales channels of LED lights owing to the increasing demand for such lights by the population of the US for residential, commercial and industrial use.

EXTERNAL LEGISLATION AND SUBSIDY PROGRAMS CONCERNING ENERGY EFFICIENCY The US and many countries in the European Union have instituted plans to institute, government regulations and programs designed to encourage or mandate increased energy efficiency in lighting. These actions include in certain cases banning the sale after specified dates of certain forms of incandescent lighting, which is advancing the adoption of more energy efficient lighting solutions such as LEDs. In addition, the growing demand for electricity is increasingly driving utilities and governmental agencies to provide financial incentives such as rebates for energy efficient lighting technologies in an effort to mitigate the need for investments in new electricity generation capacity.

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ISSUES AND CHALLENGES IN US LED LIGHTING MARKET LACK OF STANDARDIZATION The major issue in the US LED market is that not all manufacturers follow the standards that are stipulated for the LED industry, which makes it hard to compare products among the manufacturers. The standards laid by the energy department calls for

certain descriptions and measures to be followed by the manufacturers for producing LED lights. These regulations are made for the interest of the customers and to make them safe against the harmful radiations of LED lights.

Lack of standardization among the manufacturers makes customers analyze the photometric profile of each LED lamp before they can actually purchase it. Despite of increased quantity of LED lights available descriptions of the industry limit the trust of the in the market, not all conform to the quality standards customers towards the growing number of products which can sometimes be hazardous for the customers’ available in the US LED lighting market. health. Manufacturers not following the standard

LIMITED SCOPE FOR ADOPTION OF LED LIGHTING ON STREETLIGHTS Several streetlights in U.S. cities (5,000 of Ann Arbor’s 7,000 lamps, for example), are owned by the local utility, while the municipality pays for the electricity and operating costs. Because most utilities bring in money based on the amount of energy they sell, changing over to more efficient lamps would therefore reduce the utility’s revenue. However, the US energy

department has introduced a new policy which have decoupled utility profits from electricity sales, creating a mechanism for utilities to make up for some of the revenue they would lose as electricity sales decline, and in some cases offering incentives for efficiency programs

HIGH OPERATING EXPENDITURE FOR STREETLIGHT APPLICATIONS The US government has installed LED lights in almost all major streets and highways of the country.

over 60% of their electricity spending on the use and installation of LED lights for street lighting purposes. Street Lighting accounts for less than 1% in The upfront cost for such lights is still higher than regular fluorescent bulbs which were traditionally the overall electricity use in the US. used. The initial cost to be incurred thus creates a However, despite of the low share in electrical usage, barrier for the government to switch to LEDs, thereby high operating expenses are involved due to the impacting the sales of such lights in a negative growing roadways in the country. Municipalities incur manner.

ISSUES AND CHALLENGES IN US LED LIGHTING MARKET

HIGH INVESTMENT Setting up an LED plant is manufacturing fluorescent lights.

expensive

than

from traditional lighting. Manufacturers thereby prefer to start a traditional lighting plant and then Manufacturers find it difficult to switch to LED shift to LED manufacturing after the accumulation of funds. Estimating high maintenance cost and profits manufacturing due to the high investment to be earned overtime makes it difficult for the LED involved in setting up the plant. players to calculate their return on investment, thereby The budgetary issue posed by LEDs allows limited restricting them to enter into the LED manufacturing players to enter the market as manufacturers need business. significant upfront investment to shift to LED business

LACK OF AWARENESS ABOUT ADVANCED LIGHTING TECHNOLOGIES The LED light market of the US has witnessed significant changes in expanding product lines of the market. With new technology being adopted by the manufacturers, various LED lights are offered to market making the customers confused about the differences among the products due to lack of

awareness about the advanced technology. The rapid evolving technology leads to changes being brought about in the LED lights overtime, which makes it hard for the customers to buy new lights with minor changes in the latest models.

LED promotions are done on a large scale, but the limited advantages of new products over the existing products restrict the customers to replace their lights with the latest LED lights in the market. LED lights last longer than regular fluorescent lights and thus customers do not prefer changing them with every new development in the market. Manufacturers adapt to the changing technology to offer distinguished products to the customers which

could add to their profitability, however people often find it confusing to choose from a variety of products with similar benefits. The lack of knowledge among the customers pertaining to new developments further restricts the growth of LED light market in the country.

IMPERATIVE TO MEET CUSTOMER STANDARDS The manufacturing of LED is a highly complex process and the customers always specify quality, performance and reliability standards that the companies have to meet. If the product fails to meet such standards, the companies have to replace or rework on the product. Even if the products meet standard specification, the customers attempt to use the LED in such applications for which they are not actually designed which can lead to product failures and harness customer satisfaction issues. If such issues arise, the losses which the company bears have been summarized below:

• Cost associated with removal, collection an destruction of the product • Payment made to replace product • Cost associated with replacing the product • Write-down or destruction of existing inventory • Loss of sales due to unavailability of product for a period of time • Delays, cancellation or rescheduling for a period of time • Increase product returns

ISSUES AND CHALLENGES IN US LED LIGHTING MARKET

LOW MARKET PENETRATION Despite the efforts of government and LED manufacturing companies to shift people from traditional lighting to energy saving LED lights, there still has been a low penetration of LED lighting techniques in the US. The overall electricity market is driven by the ongoing ways of fluorescent lights wherein the market players in the LED manufacturing

sector are trying to penetrate the market by making people aware about the benefits associated with using such lights.

Low penetration of each type of LED light in the market is considered to be the most crucial challenge in the industry.

Table 11-1: Number of LEDs Installed and Penetration Rate in the US Lighting Market, 2014

Type of Light

LED Units Installed in 2014(Millions) LED Penetration in 2014 (%)

A-Type Decorative Directional Small Directional Linear Fixture Low/High Bay Area/Roadway Parking Lot Parking Garage Building Exterior

77.7 17.8 67.0 10.3 12.5 3.1 5.7 2.8 1.8 7.6

2.4 1.5 5.8 21.8 1.3 2.2 12.7 9.7 5.0 11.5

Source: US Department of Energy, Ken Research Analysis

Table 11-2: Number of LEDs Installed and Penetration Rate in the US Lighting Market, 2015

Type of Light

LED Units Installed in 2015(Millions) LED Penetration in 2015 (%)

A-Type Decorative Directional Linear Fixture Low/High Bay Parking Area and Roadway Building Exterior

196 18 136 31 5 9 9 12

6 2 11 3 6 17 21 21

Source: US Department of Energy, Ken Research Analysis

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SWOT ANALYSIS FOR THE US LED LIGHTING MARKET Table 12-1: SWOT Analysis for the US LED Lighting Market

Strengths

Weaknesses

• The growing concerns about the environment coupled with better efficiency of LED lighting has proliferated the demand for LED lights in the • The production of LED lights requires a high country. investment due to the complex technology involved • One of the biggest strengths of the LED market coupled with high cost of raw materials. Thus, in the US is that the market players rely heavily companies engaged in the production process on research and development in a bid to stay are unable to attain high economies of scale due ahead of competition. The LED market is driven to competitive pricing prevailing in the country. by futuristic innovations. Thus, companies are • Outdoor lighting particularly in parking lots and constantly expanding their R&D facilities. garages still have a limited share in the revenues • The manufacturers and distributors of LED lighting of LED lights due to the privately owned spaces for in the US rely on a strong distribution network in parking in the country. People still prefer Halogen order to ensure their products are reaching all lamps to be used in such areas. parts of the country. Retail channel is one of the • Despite of the changing technology which is most widely used distribution channel for LED benefitting the overall lighting industry, lack of lights in the US. awareness among the customers is still the biggest • Due to the absence of toxic elements such weakness that the industry faces. This restricts a as mercury, LED lights are beneficial to the large number of people switch to LED lights from environment. Additionally, LED lights do not emit traditional lighting sources. heat and CO2, making them one of the most environmentally friendly lighting options over traditional lighting methods.

Opportunities

Threats

• The biggest opportunity for LED lights lies in the residential, commercial and industrial sectors, due to the high reliance of these sectors on lighting. • The Chinese LED market is considered to be the Additionally, due to higher usage, the amount of biggest threat to the US LED lighting market. This savings is highest in these segments. is because US imports major LEDs from China • The efficiency of LED lighting has been persistently at cheaper prices, restricting its own ability to increasing over the past decade, due to constant manufacture LED lights in the country innovations in LED technology. This has led to a • New innovations and rapid technological quick return on investment for LED products. development have been the major threat for the • Number of initiatives taken by the government sector to shift people from traditional lighting methods to the use of LED lights has helped the lighting manufacturers to expand their business lines. Source: Ken Research Analysis

RECENT TECHNOLOGIES IN US LED LIGHTING MARKET Table 13-1: Recent Technologies in US LED Lighting Market

Technology Description • Technology giant Samsung introduced the second generation Chip-on-Board (COB) LED packages that featured the highest light efficacy for the industry in COB lineups. The latest technology from Samsung is suitable for directional lighting purposes and delivers high Chip-Onperformance levels and reliability to the users. Board LED • This D-Series generation 2 lighting is available in wide color ranging index levels and confirms to Packages the quality standards laid down by DLC Premium Standards in North America. • The latest advancement is more suitable for spot lighting which significantly features 50% lower thermal resistance than the LED lights of first generation. • LED lights containing tiny nanorods are the latest developments in the LED lighting market of the US. Using LED rays which can detect and emit light, devices can now be controlled with touchless gestures. • The nanorods installed in an electronic device measure less than five nanometers in diameter Nanorod which are made up of semiconductor materials. Their ability to switch on and off quickly makes LED them different from other LED lights in the market. Mostly meant for using in phones and tablets, the brightness and pixels can be adjusted for such lights as per the individuals’ requirements. • Though the technology has already been brought to be used in future, researchers and developers are still working on its ability to emit three color displays with blue, green and red pixels. • The advancements in LED lights market called for the increased demand for filament LEDs, which is still an untapped segment of the US lighting market. LED technology leader Seoul Semiconductor announced the mass production of filament LED lights in the country. Filament • The company started with the manufacturing of its patented 50 mm and 38 mm filament LEDs. LED Filament LEDs are typically used in lights meant for decorative purposes. These lights have the ability to emit high quality light with significant omni-directional emission technology. • Filament LED lights are expected to cater the residential and commercial sector which requires lights to be installed indoors. • The application of LED lights in the horticulture sector is a recent development wherein Adura LED Solution based in California launched new horticulture LED modules into the lighting market of the US. Horticulture • With high quality and best in-class performance, these lights offer homogeneous distribution of LED light with right color ratios and wavelengths required for photosynthetic response. Depending upon the lighting needs of various plants, the company customizes horticulture LEDs as per the requirements with proper uniformity, intensity and light distribution. • American manufacturer, Luxtech announced its flexible LED tapes to be used in LED luminaires. Unlike traditional LED tapes, these tapes are can be cut as per the requirements of the users. Flexible LED • The copper installed in the light is heavier which ensures excellent thermal performance and Tapes brightness consistency. Running up to a continuous distance of 20 feet, these flexible LED tapes offer users the experience to use LEDs anywhere they want, simply by sticking the tapes at any surface or area both indoor and outdoor. Source: Ken Research Analysis

MANUFACTURING CLUSTERS FOR LED AND COMPONENT MANUFACTURERS IN THE US The lighting market of the US has been expanding over the recent past with increasing number of LED manufacturers and suppliers entering the sector. The use of LED lights is no more restricted to a various regions; however, manufacturing facilities are set up at places where economies of scale can be achieved. These LED and component manufacturing firms are spread across the country,

where California has the highest concentration of component and fixtures involvement. Other geographical areas where large number of LED chip manufacturers and component suppliers are based include North California, Michigan and Illinois. The manufacturers of fixtures and luminaires are geographically dispersed throughout the US.

Table 14-1: LED Lights and Components Manufacturing Clusters in the US

Major States in US California New York Massachusetts Florida Texas Illinois New Jersey Michigan Colorado Minnesota Nevada North California Pennsylvania Georgia Washington

Number of Manufacturers 83 24 23 21 13 13 13 9 9 8 7 7 6 6 6

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MANUFACTURING CLUSTERS FOR LED AND COMPONENT MANUFACTURERS IN THE US

Major States in US Wisconsin Connecticut South California New Hampshire Rhode Island Vermont Utah Virginia Tennessee Missouri Kansas Delaware Maine Kentucky Oregon

Number of Manufacturers 5 5 5 4 4 3 3 2 2 2 2 2 1 1 1

Source: US Department of Energy, Ken Research Analysis

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GOVERNMENT INITIATIVES AND REGULATIONS IN THE US LED LIGHTING MARKET ENERGY STAR CERTIFICATION About the Program: ENERGY STAR is a joint electronic energy efficiency certification project launched by the U.S. Department of Energy (DOE) and the Environmental Protection Agency. The project has listed specific regulations for LED engines and luminaires used in residential applications, products that meet its energy standards can receive the ENERGY STAR label. Some of the regulations listed under this program are:

• Lights with a diameter ≤20/8-inch needs to be greater than 45 lm/W. Focus: The Energy star program focuses on following parameters such as: • Luminous Flux • Power Input • Life of LED

• Light Distribution • Uncovered LED light engines energy efficiency must be greater than 50 lm/W, while covered LED • Luminaire Efficiency engines light efficiency has to be greater than 40 • Correlated Color Temperature lm/W • Color Rendering Index • None standard LEDs with power below 10W, and Application Procedure for Energy Star: The non directional LED luminaires luminous efficacy procedure to obtain Energy Star certification is: has to be greater than 50 lm/W • Apply as ENERGY STAR Partner and acquire OID • Luminous efficacy standards for none standard LEDs with a power greater than 10W and none • Sign Certification Body Agreement with Intertek directional LED luminaires need to be greater • Complete test at any one of Intertek’s Recognized than 55 lm/W Testing Laboratory or test through Intertek’s Satellite Program • Decorative LED luminaires luminous efficacy needs to be higher than 40 lm /W while directional LED • Intertek issues certification luminaires luminous efficacy varies according to • ENERGY STAR label can be used immediately on the luminaire size. your product.

GOVERNMENT INITIATIVES AND REGULATIONS IN THE US LED LIGHTING MARKET

DLC (DESIGN LIGHTS CONSORTIUM) About the Program: It is a voluntary energy efficiency program initiated by Northeast Energy Efficiency Partnerships (NEEP). It covers highperformance solid-state lighting (e.g. LED grille light, LED fluorescent light, high bay light, and others.) not covered by ENERGY STAR, and will no longer perform accreditation on products that fall within the scope of ENERGY STAR

• Color parameters, including color temperature and color rendering index • Lumen maintenance • Power factor • Harmonic distortion Application Process: The procedure to obtain DLC certification is:

Focus: The DLC Program focuses on following • Download Form on DC Website for Registration parameters such as: • Submit the LM-79 test report issued by a NVLAP • Total luminous flux accredited laboratory through the site • Zonal flux • Review, verify and approve the submitted report • Luminous efficiency

LIGHTING FACTS About the Program: LED Lighting Facts program is designed to provide a manufacturer who has been identified to have sent its products to an accredited third-party testing laboratory for independent testing with a platform for a public display of information on its LED lighting products. It mainly applies to complete AC mains or DC-powered lamps, low voltage 12V AC or DC lamps, detachable power LED lamps, linear or modular LED lighting products Focus: The Lighting Facts focuses on following parameters such as: • Light output

• Energy consumption • Luminous efficiency • CRI and CCT Application Process: The procedure to obtain Lighting Facts0 certification is: • Download a form on the Lighting Facts website for registration • Submit the LM-79 test report issued by a NVLAPaccredited laboratory through the site • Review, verify and approve the submitted report

LED LIGHTING FACTS LABEL About the Program: The program follows same testing standards as Energy Star. This requires essential product information be disclosed to help luminaire manufacturers and others in the supply chain validate their product performance claims. Lighting Facts Label can be applied to any lighting product for general illumination purposes. Label design is different for LED lighting Application Process: The procedure to obtain

Lighting Facts0 Label is: • Sign up and take pledge online on Lighting facts label website • Submit LM-79 Test Report from a NVLAP Accredited Test Laboratory • Test Reports then Reviewed, Verified and Approved • Print Quality Version of Lighting Facts Label with your product’s unique characteristics.

GOVERNMENT INITIATIVES AND REGULATIONS IN THE US LED LIGHTING MARKET

OTHER STANDARDS FOR LED LIGHTING IN US Table 15-1: Standardization Bodies for LED Lighting in the US

Concerned Organizations Standardization Bodies Professional Associations

Standard Organizations Trade Associations

• SAE (Society of Automotive Engineers) • IESNA (Illumination Engineering Society North America) • IEEE-SA (Institute of Electrical and Electronics Engineers Standards Association) • UL (Underwriter Laboratories) • ANSI (American National Standard Institute) • NEMA (National Electrical Manufacturers Association) • JEDEC (Joint Electron Device Engineering Council) • SEMI (Semiconductor Equipment and Materials International)

Source: Ken Research Analysis Table 15-2: Legislation and Documentation required to become Eligible for Posting LED Products on Energy Star Website

Performance Characteristic Luminaire Efficacy: Light Output Input Power Power Factor Lumen Maintenance (L70) Color Rendering Index Chromaticity and Correlated Color Temperature Color Spatial Uniformity and Color Maintenance Maximum Measured Power Supply Case or Manufacturer Designated Temperature Measurement Point (TMPPS) Temperature Noise

Methods of Measurement Required Documentation Reference Standards

ANSI C82.77-2002 IESNA LM-80-08 ANSI C78.377-2008 IESNA LM-79-08 CIE 13.3-1995 IESNA LM-58-94 IESNA LM-79-08 CIE 15: 2004 IESNA LM-58-94 IESNA LM-16 IESNA LM-79-08 CIE 15: 2004 IESNA LM-58-94 IESNA LM-16

• Self Certification • Note: A laboratory test report must be submitted upon DOE request. • Laboratory test results must be produced using the specific package(s)/module(s)/ array(s) and power supply combination that will be used in production.

ANSI/UL 153 UL 1598

Class A sound rating: Power supply not to exceed 24 dB

Luminaire Warranty Safety Portable Fixtures Hardwired Fixtures

• Laboratory test results must be produced using the specific package(s)/module(s)/ array(s) and power supply combination that will be used in production. • Provide a test report from a laboratory accredited by NVLAP or one of its MRA signatories. • Note: If the laboratory used for this test is accredited by NVLAP or one of its MRA signatories it must also have a scope of accreditation that includes the method of measurement reference standard for this performance characteristic.

IESNA LM-79-08 ANSI C82.2-2002

ANSI/UL 153 UL 1598

• Self Certification • Note: A laboratory test report must be submitted upon DOE request. • Provide copy of the actual three-year manufacturer luminaire warranty that is included in the packaging. • Provide the cover page of a safety test report or a general coverage statement from an OSHA NRTL laboratory.

Source: Energy Star, Ken Research Analysis © Licensed product of Ken Research; should not be copied

COMPETITIVE SCENARIO IN US LED LIGHTING MARKET US LED lighting market is highly concentrated with the presence of few leading lighting manufacturers in the country. Since the sector requires large amount of capital to be invested, this has inhibited the emergence of several companies in the space. Frequent introduction of new LED products, rapid changes in technology, changing customer requirements, short product life cycles and prices of similar technology by various companies are common platforms on which the competition prevails in the overall lighting market of the US.

Competition in LED Products/ Components Segment: LED products are primarily comprised with LED Chips, LED components, SiC materials and Power & RF products segment: • LED Chips: Under the LED chips market, the competition lies between the companies that sell or manufacture nitrite based LED chips such as Nichia Corporation. The company sells LED chips to a number of LED packaging companies. Nichia is the leading company in US for Nitrite based LED chips. Apart from Nichia, there are several other LED chip manufacturer such as Osram, Toyoda Gosei, Epistar Corporation, Sanan Optoelectronics and others. The companies in this segment operate on the basis of performance, price and strength of intellectual property.

Competition in LED Lighting Products (finished products) Segment: Lighting products segment currently faces competition from traditional lighting fixture companies, lamp manufacturers and from nontraditional companies focused on LED lighting systems including fixtures and lamps. Lighting companies such as Cree, Acuity brands, Copper Lighting division of Eaton Corporation, general electric company, Hubbell Incorporated, Philips and Osram are the major competitors in the market. Apart from this, there are also small and medium sized • LED Components: Some of the major companies lighting companies. LED Lighting products compete which are operating in US LED components against traditional lighting products in US such as market are Nichia, OSRAM, Lumileds Holdings, incandescent, halogen, ceramic metal halide, high Samsung and others. These companies sell LED pressure sodium and other lighting technologies. components that compete indirectly with target These products are competed against superior energy customers for LED chips and compete directly with savings, extended life, improved lighting quality and XLamp LED components and LED modules. The lower cost of ownership. companies apart from brand image compete on the basis of performance, price and usability.

COMPETITIVE LANDSCAPE OF MAJOR PLAYERS IN US LED LIGHTING MARKET CREE INC. Table 17-1: Company Profile for Cree Inc. Including Company Overview, USP, Business Strategy, Key Customers, Best Selling Products, Major Source of Revenue, Recent Developments and Total Number of Employees.

Parameter

Company Overview

USP

Rationale • Cree Inc is among the popular lighting players of the US and is considered to be the market leader for innovation of LED lightings and semiconductor solutions for power and wireless applications. • Cree typically manufactures LED products, semiconductor products for power and radio-frequency applications and other related lighting products as a part of its business segment. • The world’s leading business media brand Fast Company, announced Cree among the world’s fifty most innovative companies of 2015. • Founded in July 1987, Cree Inc. is headquartered in Durham, North California, United States • Continuous Innovation: Cree is the market leader and innovator of LED lighting and semiconductors for wireless and power applications. Their continuous innovation in technology and products helps Cree having an edge over its competitors • With big-name competitors like General Electric and Philips Lighting, Cree has thrived by constantly innovating, changing direction and coming up with new products.

COMPETITIVE LANDSCAPE OF MAJOR PLAYERS IN US LED LIGHTING MARKET

Parameter

Rationale

• Reserve Building Strategy: Due to the severe pricing competition in the LED lighting industry of the US, Cree is focused at building up its reserves and stock in anticipation of the increasing demand for LED lights in future. This is the major reason which is responsible behind Cree’s popularity in the country wherein it caters timely demand for LED lights of all its sectors. • Strategic Investments: In 2014, Cree invested USD 83 million in Lextar Electronics, which is an LED manufacturer of Taiwan. This investment helped Cree in acquiring 13% shares of Lextar along with expanding its capacity of mid-power LED lights to meet the demand of the US population. Cree also makes investment to improve and Business expand its sales and marketing programs, wherein it builds market awareness for its Strategies brand • Cree will restructure its LED business in order to reduce overhead and to improve the business’s cost structure in the future. According to Cree’s announcement, the restructuring savings will amount to USD 85 million including USD 47 million in capacity and overhead cost reductions, USD 27 million in channel revenue reserves, and USD 11 million in inventory reserves • The company will continue to make investments to expand sales, marketing, technical application support and distribution capabilities to sell lighting products and enable new and existing customers to implement LED and power technology in their products. • Arrow Electronics accounted for 10%, 12% and 13% revenue in 2016, 2015 and Key Customers 2014 respectively. • Home Depot accounted for 11% revenue in both 2015 and 2014. • A19 75 Watt LED Replacement Bulb, 60 Watt Equivalent Soft White A19 Dimmable Best Selling LED Bulb, 60 Watt Equivalent Daylight A19 Dimmable LED Bulb, 100 Watt Products Equivalent Daylight A21 Dimmable LED Bulb, 65 Watt Equivalent Soft White A19 Dimmable LED Bulb Major Source • 55% revenue was earned from sales to distributors as of June 2016. of Revenue • XP-L2 LED: Announced in September 2016, the XP-L2 LED Lights deliver 7% more lumens and 15% higher lumens per watt than the already leading XP-L LED. • XHP50.2 LED: With a capability of producing over 2,500 lumens from its light Recent emitting surface of 6mm, such lights can be used for both directional and street Developments lighting purposes • The company has recently launched Industrial High bay LED lights which is a new market segment for Cree. Number of • 6,237 regular full-time and part-time employees as on June 26,2016 Employees Source: Cree Reports. Ken Research Analysis

COMPETITIVE LANDSCAPE OF MAJOR PLAYERS IN US LED LIGHTING MARKET

Table 17-2: Product Portfolio of Cree Inc and Price per Unit in USD

Product lines

Price Per Unit(USD)

Standard A-Type LED Daylight (40 Watt, 60 Watt, 75 Watt and 100 Watt) Soft White (40 Watt, 60 Watt, 75 Watt and 100 Watt) Soft White 3-Way (30 Watt, 60 Watt and 100 Watt) Reflector Bulbs (Flood/Spot) BR30 65 Watt PAR30-TW Series 75 Watt PAR38 120 Watt Downlights (55 Watt, 65 Watt and 100 Watt)

5.2-14.0 5.0-13.0 15.0 8.3-8.7 20.0 19.7-20.0 17.0-20.0

Source: Cree Reports, Ken Research Analysis Table 17-3: Plant Locations for Cree Inc. in the US and Total Area of Each Plant in Sq. Ft.

Plant Locations Owned Plants Durham, North California Racine, Wisconsin Research Triangle Park, North California Leased Plants Durham, North California Laredo, Texas Yorkville, Wisconsin Fayetteville, Arkansas Goleta, California

Total Area (Sq. Ft.) 966,844 802,845 203,995 189,430 100,545 79,016 26,076 25,623

Source: Cree Reports, Ken Research Analysis

Â© Licensed product of Ken Research; should not be copied

COMPETITIVE LANDSCAPE OF MAJOR PLAYERS IN US LED LIGHTING MARKET

Figure 17-1: Financial Performance of Cree Inc. on the Basis of Revenues from Sale of LED Lighting and LED Products in USD Million, 2011-2016

2,000

1,540.1

1,508.1

1,500.0

2014

2015

2016

1,500

USD Million

1,296.6 1,091.6 1,000

890.0

500

2012

2011

2013

Source: Cree Financial Statements, Ken Research Analysis Figure 17-2: Financial Performance of Cree Inc. on the Basis of Net Revenues from Sale of LED Products in the US in USD Million, 2014-2016

600 516.4

524.6

2015

2016

500

USD Million

400

381.5

300

200

100

2014

Source: Cree Financial Statements, Ken Research Analysis

Â© Licensed product of Ken Research; should not be copied

COMPETITIVE LANDSCAPE OF MAJOR PLAYERS IN US LED LIGHTING MARKET

Figure 17-2: Financial Performance of Cree Inc. on the Basis of Net Revenues from Sale of LED Products in the US in USD Million, 2014-2016

50%

46.0%

40% 35.0% Percentage

32.0% 30%

20%

10%

2014

2015

2016

Source: Cree Financial Statements, Ken Research Analysis

Â© Licensed product of Ken Research; should not be copied

COMPETITIVE LANDSCAPE OF MAJOR PLAYERS IN US LED LIGHTING MARKET

PHILIPS Table 17-4: Company Profile of Philips Including Company Overview, USP, Business Strategy, Product Portfolio, Plant Location in the US, Recent Developments and Total Number of Employees.

Parameter

Company Overview

USP

Business Strategies

Product Portfolio Plant Location in the US

Rationale • The leading technology giant Philips, caters to the needs of global customers by providing lighting solutions to residential, commercial and healthcare sectors across the countries. • The company typically deals in three business segments: Healthcare Products, Consumer Lifestyle and Lighting Technologies which comprises of the overall LED lighting products under Philips brand name. • Philips has been successfully considered as the Energy Star Partner of the Year for three consecutive years in 2015 due to its wide product line of Energy Star certified products offered in the market. • Having its headquarters in Amsterdam, Netherlands, Philips was established as an electronics company in May 1891, wherein the company began by manufacturing carbon filament lamps. • Philips has been developing light sources for horticulture for many years and continues to invest heavily in horticultural lighting. In R&D for Lamps, Lighting Electronics and LED, a team of engineers works full-time to improve existing lamp and gear concepts and to develop new lighting systems for horticultural lighting • The biggest USP of Philips is that they identify the changing needs of the market and the lighting trends that affect the customers. There are various factors that define and control the flow of this trend, and these are shifting of the population to urban cities, rise in energy costs, lighting used in modern buildings and several other factors • Philips has greatly focused on LED technology to provide energy efficient and effective lighting solutions for residences and corporate houses. • Strategic Geographical Expansions: Philips has been a global leader in lighting solutions by expanding across all regions. The company’s wide distribution network of LED lights in the US makes it cater to almost every segment ranging from household lighting to building exteriors and street lighting fixtures. • Individual Branding: Philips operates as a single platform wherein it offers all its products under an individual brand name rather than multiple branding platforms. This makes customers quickly identify the product of the company which in turn adds to sales of Philips • As LED technology evolves, the lumens per watt or efficacy is a key parameter that the company is focusing on. This efficacy is increasing each day. Philips is consistently improving their product range using the latest technology. The product life cycle now stands at six months, and after every six months Philips introduces an upgraded version of a product • LED lamps, LED tubes, LED Luminaires • Cambridge, Massachusetts, Missouri

COMPETITIVE LANDSCAPE OF MAJOR PLAYERS IN US LED LIGHTING MARKET

Parameter

Rationale

Recent Developments

• Horticulture LEDs: The latest product of Philips in the LED segment includes lighting procedures for plants. These lights have dimmable capacities that help the plants in photosynthesis process. • Fresh Food LEDs: Philips introduced warm lights that enhance the color of cheese, Bread, Fruits and vegetables. It also offers lights that maintain the color texture of meat • Philips and SAP give planners a 360-degree view of data such as street lighting, parking and traffic controls — to plan better and manage costs. The partnership empowers city managers to respond to evolving applications and the changing needs of a smart city and to generate data-driven insights for better decision making and better citizen services, while realizing energy savings of over 50%

Number of Employees

• 23,614 employees in North America as of December 2015

New Products Launch

Top Selling Products

• • • • • • • • •

LuxSpace Accent Crispwhite StyliD Fresh Food Master LED Tube Flow line LED Philips 60W Equivalent Soft White A19 LED Light Bulb Philips 60W Equivalent Daylight A19 LED Light Bulb Philips 50W Equivalent Bright White GU10 LED Light Bulb Philips Hue Light Strip Plus Multi-Color LED Light Strip Philips 60-Watt Equivalent Blue A19 Non dimmable Autism Speaks LED Light Bulb Philips 65W Equivalent Soft White BR30 Dimmable Flood LED Light Bulb

Source: Company Reports, Ken Research Analysis Best selling products have been compiled as the first five best selling product from Home depot as on 6th April 2017

COMPETITIVE LANDSCAPE OF MAJOR PLAYERS IN US LED LIGHTING MARKET

Figure 17-4: Financial Performance of Philips on the Basis of Net Revenues from Sale of LED Products in North America in USD Million, 2011-2015

1,000

931.6

800

USD Million

645.5 600

565.5 467.5

400 312.8 200

2011

2012

2013

2014

2015

Source: Philips Financial Statements, Ken Research Analysis Figure 17-5: Revenue Share from Sales of Philips LEDs in the Company’s Overall Sales in the US Market in Percentage, 2011-2015

50% 43.0% 40%

Percentage

34.0% 29.0%

30% 22.0% 20% 16.0% 10%

2011

2012

2013

2014

2015

Source: Philips Financial Statements, Ken Research Analysis © Licensed product of Ken Research; should not be copied

COMPETITIVE LANDSCAPE OF MAJOR PLAYERS IN US LED LIGHTING MARKET

Table 17-5: Philips Lighting Product Portfolio, 2016

Product Type

Indoor Luminaires

Outdoor Luminaires

Conventional Lamps

LED Lamps and Systems

Lighting Electronics

Lighting Controls

Model • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • •

Recessed Suspended Surface Mounted Wall Mounted Free Standing Downlights Multiple Lighting Systems Projectors Luminous Surfaces High/Low Bay Light-Line Systems Battens Waterproof and Cleanroom Indoor Residential Collection Road and Urban Lighting Architectural Floodlighting Sports and Area Floodlighting Tunnel and Underpass Lighting Outdoor Residential Collection Fluorescent Lamps and Starters Compact Fluorescent Integrated Compact Fluorescent Non – Integrated Compact High Intensity Discharge High Intensity Discharge Lamps Halogen Lamps Special Lamps Lamp Replacement and Projection Incandescent Lamps LED Lamps LED Tubes LED Display Lighting Systems HID Fluorescent Halogen Electronic Transformers LED Electronic Drivers Installer Based Smart Sensors Indoor Accessories Indoor Lighting Management Systems Luminaire Based Systems SSL Controls Outdoor Lighting Management Systems Outdoor Stand Alone

Source: Philips Company Report, Ken Research Analysis

COMPETITIVE LANDSCAPE OF MAJOR PLAYERS IN US LED LIGHTING MARKET

GENERAL ELECTRIC COMPANY Table 17-6: Company Profile of General Electric Company Including Company Overview, USP, Business Strategy, Key Customers, Partnerships and Acquisitions, Product Portfolio, Plant Location in the US, Recent Developments and Total Number of Employees.

Parameter

Rationale

• Headquartered in Fairfield, Connecticut, United States; General Electric Company (GE) was incorporated on April 15, 1892. • The key products and services of GE range from power generation, aircraft engines, equipments for oil and gas production to lighting technologies, medical imaging, industrial and financial products. Company • GE is present across various business verticals which include renewable energy, power, oil Overview and gas, healthcare, aviation, energy connections and lighting, transportation and capital. • GE created Global Center of Excellence at its manufacturing site in Ohio by investing USD 60 million in 2010. • The company manufactures sources and sells a wide range of lighting products including LEDs, halogen, fluorescent and HID technologies. • Smart City LED Lights: GE installed smart LED lighting solutions at the streets of San Diego and Jacksonville, which would connect, collect and analyze data to control the industrial USP internet power in the city. This helps the company in optimizing operations and creating connections with visitors and residents. • Ecomagination Strategy: Using intelligent and innovative resource-efficiency solutions, GE has been successful in developing new business models to connect with various sectors of the economy and having a wide network of its partners and distributors, which would supplement the sales for the company. • Extensive Research and Development: GE specializes in its R & D capabilities which it carries from time to time so as to adopt even the minor advancements in technology. With a global employee base of over 300,000, GE makes continuous improvements in its lighting products. Business • Focus on Commercial and Industrial Lighting: With its growing operations in lighting products, Strategies GE is expanding its customer base in commercial and industrial sectors especially by offering street lighting products and other LEDs that are typically used in office infrastructures • GE is starting to help cities install LED streetlamps that could be used for all sorts of purposes, such as monitoring traffic, measuring snowfall and even identifying the location of gunshots. Current also aims to help retail stores use light to send Morse Code-style messages to the smart phones of customers as they walk through the store • General Electric Lighting has announced plans to close its lamp plant in the central Illinois city of Mattoon during 2017. This shut down will take place due to decline in demand for traditional lighting Key Customers • Wal-mart and Walgreens • Commercial Lighting Division, Current: GE’s commercial lighting division was separated in 2015 and started operating as a new startup, Current. Various business segments of Current include solar lighting, LED lighting, energy storage and electric Partnerships vehicles charging stations. and • Agreement with Nuventix: In 2011, GE invested USD 10 million in Nuventix and Acquisitions entered into a licensing agreement for Nuventix’s LED cooling technology. • LED Supplies of Lightech: In 2011, GE acquired Lightech’s LED and halogen power supplies in a deal which was reported to be worth USD 15 million to USD 20 million. © Licensed product of Ken Research; should not be copied

COMPETITIVE LANDSCAPE OF MAJOR PLAYERS IN US LED LIGHTING MARKET

Parameter

Rationale

Product Portfolio

• LED lamps, Outdoor LED lighting Fixtures, LED High/Low Bay, Directional LEDs and Architectural LED Lights. • The company owns 184 manufacturing plants in 38 states of the US, however it plans to shut down 6 plants as of August 2016 • The production plant in Bucyrus is GE Lighting’s global center of excellence for the manufacture of energy-efficient linear fluorescent light bulbs. Bulbs made in Bucyrus are sold to customers across the U.S. and in cities around the world like Singapore, Riyadh, Jeddah, and Santiago • The Hendersonville plant serves the global market for outdoor LED lighting systems for roadways, parking lots, and other area lighting applications. Hendersonville also manufactures outdoor and industrial lighting products that use traditional technologies. • Horticulture LED Lights: For using LED lights in the US horticulture market, GE introduced Arize Life LED to cater to the demands of testing labs, growth chambers and tissue culture labs. These LED fixtures are available in three sizes: 2 Foot, 4 Foot and 8 foot LED light bars. • Vintage Filament Bulb: GE’s latest products include vintage filament bulb that are designed to match the looks of antique light bulbs for decorative wall fixtures. The light produced by 5 watts of vintage LED bulb is equivalent to the light emitted by traditional 40 watt incandescent bulb • During 2016, JPMorgan Chase announced a deal with Current, a newly formed unit of General Electric, under which Current will plan, manage, and help finance the installation of 1.4 million superefficient light-emitting diodes at some 5,000 of the bank’s branches over the next two years • GE will begin selling household LEDs that consumers can control with a smart phone app, but only if they are inside their homes, using Bluetooth connectivity • C by GE” bulbs will include a “C Sleep” lamp able to produce several levels of light, from very bright, crisp light, to help consumers wake up in the morning, to “standard daytime light” to softer and warmer light at night “to increase melatonin before bed • GE is developing solutions that will help cities solve these problems through their existing infrastructure. By repurposing street lights with LEDs containing sensors, controls, wireless transmitters and microprocessors, a city will be able to create new opportunities for reducing cost, optimizing their operations and creating value-added services for residents, making their cities even more livable and workable.

Plant Location in the US

Recent Developments

Number of Employees

• 104,000 employees in the US as of December 2016

Top Selling Products

• • • • •

GE Enbrighten 24 in. LED Direct Wire Under Cabinet Light GE 24 in. Premium LED Direct Wire Under Cabinet Fixture GE 40-Watt Incandescent G25 Globe Double Life Soft White Light Bulb GE Enbrighten 18 in. LED Direct Wire Under Cabinet Light GE Enbrighten 12 in. LED Direct Wire Under Cabinet Light

Source: Company Reports, Ken Research Analysis Best selling products have been compiled as the first five best selling product from Home depot as on 6th April 2017

COMPETITIVE LANDSCAPE OF MAJOR PLAYERS IN US LED LIGHTING MARKET

Figure 17-6: Financial Performance of GE on the Basis of Revenues from Appliances and Lighting Business in USD Billion, 2011-2015

10.0

USD Billion

8.0

7.7

8.0

8.3

8.4

2013

2014

8.8

6.0

4.0

2.0

2011

2012

2015

Source: GE Financial Statements, Ken Research Analysis Figure 17-7: Financial Performance of GE on the Basis of Net Revenues from Sale of LED Products in the US in USD Million, 2014-2015

2,300

2,240

USD Million

2,192.4 2,180

2,168.3

2,120

2,060

2,000

2014

2015

Source: GE Financial Statements, Ken Research Analysis

Â© Licensed product of Ken Research; should not be copied

COMPETITIVE LANDSCAPE OF MAJOR PLAYERS IN US LED LIGHTING MARKET

Figure 17-8: Revenue Share from Sales of LED Lights in the Company’s overall sales in the US Market in Percentage, 20132015

30.5% 30.0%

USD Million

29.9%

29.3%

28.7%

28.0%

28.1%

27.5%

2014

2015

Source: GE Financial Statements, Ken Research Analysis

COMPETITIVE LANDSCAPE OF MAJOR PLAYERS IN US LED LIGHTING MARKET

OSRAM SYLVANIA Table 17-7: Company Profile of Osram Including Company Overview, USP, Business Strategy, Product Portfolio, Plant Location in the US, Recent Developments and Total Number of Employees.

Parameter

Company Overview

USP

Business Strategies

Rationale • German lighting technology player Osram extends its products across the global markets meeting the demands of residential, commercial and industrial sectors. • Osram manufactures quality solutions in the fields of laser systems, sensor technology, semiconductor lasers and detectors and high performance LEDs for automotive and general lighting applications. • OSRAM is one of the world’s largest suppliers of products and solutions for a wide range of customer requirements – from lamps and modules to luminaires and high-efficiency light management systems. • The major business segments of the company include Specialty Lighting, Opto Semiconductors, Lighting Solutions and Digital Systems. • The innovative LED manufacturer has its headquarters in Munich, Germany and was founded in November 1918 • With more than 40000 employees in around 150 countries, OSRAM develops tailor-made solutions to cover the specific needs of its customers. • Osram operates in North America as Osram Sylvania Inc. and was established in 1993 when Sylvania was acquired by Osram from GTE. • The company has a USP of providing innovative LED technology for luminaire manufacturers, lighting users and other end users. LED products from OSRAM can be installed and used almost anywhere: They provide perfect illumination in domestic, industrial or office environments • OSRAM offers a broad range of LED products – from LED lamps, modules, light engines, drivers and controllers to entire luminaires. Even customized LED modules can be produced in order to meet individual requirements • Product Portfolio Expansion Strategy: Osram was traditionally known for its lighting products. The company now successfully manufactures high quality chips as well which lowers the production cost of LED lights as chips are not to be purchased from other suppliers, thereby expanding its product portfolio to cater to the rising demand for LED lights. • Product Customization Strategy: Osram typically provides customized LED lights as per the standards of various regions where it operates. It customizes the entire portfolio so as to confirm to the technical requirements of areas and the segments where LED lights are demanded. • Strategic Collaborations: Osram’s collaborations with global scientific partners have been significantly driving its research and development activities for innovating new products. The company has tied up with various universities, research institutions and other companies to work on different projects including research programs sponsored by the government • OSRAM has expanded their business model to include professional lighting solutions. The implementation of customized, energy efficient and innovative lighting concepts is likely to represent growing business for the future • Currently, the product portfolio of the company includes a number of traditional products that meet various customer needs including sockets and wattage. This offers opportunities for the company to lower down the cost and cut back on production equipments for traditional products • In the Lighting Solutions & Systems segment, Osram will roll out many different measures in the coming years to implement intelligent, technologically advanced lighting solutions. In particular the continuing urbanization trend, where connectivity and data integration will be key factors, offers high potential. Against this backdrop, the luminaires and solutions business will expand its offering of complete solutions, among other things. In this respect, Osram will build on its existing know-how, also in the field of sensor technology, to make buildings and cities even smarter in the future. © Licensed product of Ken Research; should not be copied

COMPETITIVE LANDSCAPE OF MAJOR PLAYERS IN US LED LIGHTING MARKET

Parameter

Rationale

Plant Location in the US

• Wilmington, Massachusetts and Northville, Michigan

Recent Developments

• The company has expanded its business model with the inclusion of professional lighting solutions for the commercial sectors of the country. OLED technology of Osram has played a crucial role in penetrating the overall LED lighting market of the US. • Osram launched Infrared LEDs as an emitter with flat light to ensure constant light intensity in a particular area. • In the area of intelligent solutions for cities and buildings, OSRAM has launched the first system that offer added value as well as acting as luminaire. SLC RF is the new generation of OSRAM street lighting control which integrates luminaire into a wireless network • OSRAM einstone was launched at the 2016 Light+ Building exhibition. This unit creates a type of local GPS signal and provides accurate search and navigation services as well as wide range of digital application via smart phones.

Number of Employees

• As per NAFTA, the company had 2800 employees as of September 2016

Source: Osram, Ken Research Analysis Note: NAFTA comprises employees in the US, Canada and Mexico Table 17-8: Osram LED Lighting Product Portfolio

Product Type OLED Light Design LED Modules LED Light Engines Control Gears and Dimmers Light management Systems LED Lamps LED Luminaires

Number of Models 8 14 68 86 120 180 210

Source: Osram, Ken Research Analysis

COMPETITIVE LANDSCAPE OF MAJOR PLAYERS IN US LED LIGHTING MARKET

Figure 17-9: Financial Performance of Osram Sylvania on the Basis of Revenues from US in USD Million, 2012-2016

1,500

1,390.8

1,323.9 1,232.8

1,200

USD Million

949.8 900

857.0

600

300

2012

2013

2014

2015

2016

Source: Osram Financial Statements, Ken Research Analysis The revenues includes the sales of specialty lighting, Opto semiconductors and lighting solutions and systems Figure 17-10: Financial Performance of Osram Sylvania on the Basis of Revenues Share from LED Business in Percentage (%), 2012-2016

80% 70% 60.6%

Percentage

60%

54.3%

50% 40% 30%

36.2% 25.4%

28.9%

20% 10% 0%

2012

2013

2014

2015

2016

Source: Osram Financial Statements, Ken Research Analysis ÂŠ Licensed product of Ken Research; should not be copied

COMPETITIVE LANDSCAPE OF MAJOR PLAYERS IN US LED LIGHTING MARKET

LIGHTING SCIENCE GROUP CORPORATION Table 17-9: Company Profile of Lighting Science Group Corporation Including Company Overview, USP, Business Strategy, Product Portfolio, Subsidiaries, Patents, Plant Location in the US, Recent Developments and Total Number of Employees.

Parameter

Company Overview

USP

Rationale • Lighting Science is the first company to market high-output, dimmable, standard Edisonbase white LED light bulbs. Energy efficient, long-lived, reliable, and resistant to shock and vibration, these bulbs have distinct advantages over other forms of lighting. The firm’s product portfolio consists of 30 different items, from globe bulbs to strip lighting, architectural lighting, and fixtures for parking garages and warehouses • LSGC caters to the demands of residential and commercial sector, government and private infrastructure, retail and hospitality sectors, school and universities of the US. • LED products offered to residential and commercial sector include retrofit lamps, integrated retrofit kits and luminaires. • LSGC caters to retail and hospitality sector through its retrofit lamps and luminaires offerings which focus on task, bay, down, cove, track, accent, linear, spot lighting and retail display lighting. • The company sells its products through lighting and electrical distributors; parking garage operators; distributors in the spa, hospitality and leisure sectors; retailers of energy efficient products; traditional commercial and retail distribution channels; and on a direct basis through the company website. • The company provides LEDs to schools and universities for indoor class lighting purposes and lighting for building exteriors. • LSGC generates its major revenue from the sale of LED lights by the online retailer, Home Depot. • Home Depot accounted for 91%, 80% and 55% of LSGC’s revenue as of December 2015, 2014 and 2013, respectively. • Lighting Science Group Corporation is headquartered in West Warwick, Rhode Island, USA and was incorporated in June 1988. • The company includes lighting retailers and Original Equipment Manufacturers (OEMs) as its customers which further use private labels to sell the LED lights in the US lighting market • Lighting Science Group have expanded their relationship with world-class electronics manufacturer, Jabil Circuit, which will provide the Company with greater scale, global production capabilities, a stronger supply chain and faster speed to market for its new products. • Good Night and Good Day Lamps: The Company’s product portfolio of biological lighting includes good night and good day lamps which make its products distinguished from the competitors. The filter in the good night lamp reduces the blue light from the LEDs and helps the body in producing natural melatonin. Good day LED lamps have blue spectrum which helps in enhancing the alertness and energy levels of the human body. • Sapphire Awards Finalist: LSGC was among the finalist in four separate categories of the Sapphire Awards 2017. Shatter resistant LED lamps, Durabulb, HealthE Genesis Dynaspectrum Lamp and the L-Bar Lamp of the company were among the most innovative products by the LED magazine. Being a finalist of the prestigious award built trust among the customers towards LSGC which significantly added to their sales.

COMPETITIVE LANDSCAPE OF MAJOR PLAYERS IN US LED LIGHTING MARKET

Parameter

Rationale

Business Strategies

• Independent Sales Strategy: The Company continuously focuses on creating new networks of distributors and independent sales agents to provide lighting products directly to OEMs and retailers. • Catering the Untapped Segments: With over 400 patents for innovation, the biological lighting products were first designed for NASA, wherein the special spectrum LEDs help astronauts sleep better. Providing LED lights to NASA added to the sales of the company to a large extent over its rivalry companies. Catering to the niche market, the company also introduced ‘turtle lights’ for beaches in Florida. • Strategic Joint Ventures: LSGC announced a joint venture with Chinese LED manufacturing company, MLS Co. Ltd. in March 2017. The joint venture will operate as Global Value Lighting in Rhode Island. Both companies plan to expand their customer base in North America by MLS’s best in-class manufacturing, processes and cost efficiencies. The joint venture with MLS will deliver retail partners the best value LEDs, while still providing the same or better quality and innovative solutions as high-priced, name-brand manufacturers • Lighting Science will develop the 60-watt-equivalent LED bulb with Google. Lighting Science brings the bulb know-how to the table, and Google brings software and controls to the LED. The bulbs will communicate through a Wi-Fi network anchored by a home router. Exploiting Android and tools in the home like DSL boxes could make home network fairly cheap. The only added hardware expense comes in the Wi-Fi chips

Product Portfolio

• Replacement Lamps, Luminaires, Biological Lighting

Subsidiaries

Patents Plant Location in the US

• LED Systems K.K., Japan; Lighting Partner B.V., The Netherlands; Lighting Science Cooperatief U.A., The Netherlands; Lighting Science Group Limited, United Kingdom; LLI Acquisition Inc., Delaware; LSGC Pty. Ltd., Australia; LSGC LLC, Delaware; VividGro LED Grow Lights; Lamina Ceramics; Biological Illumination, LLC; LED Effects Japan K.K. • The company obtained 366 patents from the United States Patent Office as of December 2015, with other 77 patents pending. • Satellite Beach, Florida • Melbourne, Florida; • Cocoa Beach, Florida • West Warwick, Rhode Island

COMPETITIVE LANDSCAPE OF MAJOR PLAYERS IN US LED LIGHTING MARKET

Parameter

Rationale

Recent Developments

• Light Science Group Corporation’s latest development of the Durabulb in August 2016 has revolutionized the LED lighting market of the US. Durabulb is able to withstand drops and bumps without breaking, making it the most durable LED lighting solution available in the market. • The company launched Glimpse Advantage to extend its product portfolio of downlights in June 2016. The latest product has 50% higher output and 50,000 hour lumen, making it the longest lasting warrant LED downlight available in the US lighting market • GE Lighting and the Lighting Science Group (LSG) each have new LED-based, retrofitlamp products intended to help humans sleep properly. GE’s new Align family includes different versions intended for night and morning usage. Lighting Science Group has been selling similarly-intended Good Night and Awake & Alert lamps and has now added Sleepy Baby lamps designed to assist parents in training infants to sleep through the night • GE is offering two separate LED retrofit lamps for night and morning usage. The Align PM bulbs produce an amber hue meant to mimic candlelight or fire. GE recommends that people use the 7W lamps that produce 350 lm for 30 minutes prior to bedtime. • SG has released the Sleepy Baby lamp designed for use by parents during an infant’s nightly bedtime routine. The 3.5W retrofit lamp produces 300 lm and is designed to replace a 40W incandescent bulb. The product has a very-warm 2300K CCT and is rated for 25,000 hours of use. It sells for $30 and comes with a five-year warranty

Number of Employees

• The company had 52 full-time employees in the US as of December 2015.

• Innovative LED • Products • • • • Best Selling • Products • •

Awake and Alert Good Night MyNature Grow MyNature Coastal Good Day Biological LED Lamp Sleep Baby Biological LED Lamp Good Night Biological LED Lamp Awake and Alert Biological LED Lamp 19 LED Energy Efficient

Source: Lighting Science Group Corporation, Ken Research Analysis Best selling products have been compiled as the first five best selling product from Company Website as on 6th April 2017

COMPETITIVE LANDSCAPE OF MAJOR PLAYERS IN US LED LIGHTING MARKET

Figure 17-11: Financial Performance of Lighting Science Group Corporation on the Basis of Revenues from LED Lighting in the US in USD Million, 2011-2015

150 127.1

USD Billion

120

109.0 91.3

83.2

79.7

2011

2012

2013

2014

2015

Source: Lighting Science Group Corporation Financial Statements, Ken Research Analysis Figure 17-12: Financial Performance of Lighting Science Group Corporation’s on the Basis of Share of LED Lights from Home Depot on the Basis of Revenues in Percentage (%), 2013-2015

100% 91.0% 80.0%

Percentage

80%

60%

55.0%

40%

20%

2013

2014

2015

Source: Lighting Science Group Corporation Financial Statements, Ken Research Analysis

COMPETITIVE LANDSCAPE OF MAJOR PLAYERS IN US LED LIGHTING MARKET

Figure 17-13: Annual Advertising Expenditure of Lighting Science Group Corporation in USD Thousand, 2013-2015

1,500 1,300.0

USD Thousand

1,200

900

600

300

198.0 43.0

2013

2014

2015

Source: Lighting Science Group Corporation Financial Statements, Ken Research Analysis

COMPETITIVE LANDSCAPE OF MAJOR PLAYERS IN US LED LIGHTING MARKET

ACUITY BRANDS INC. Table 17-10: Company Profile of Acuity Brands Inc. Including Company Overview, USP, Business Strategy, Brand Names, Product Portfolio, Plant Location in the US, Recent Developments, Revenue and Employees

Parameter

Rationale

• Acuity Brands Inc. is the market leader for lighting solutions in the North America, which caters to the requirements of industrial, institutional, commercial, infrastructural and residential sectors across the geographical region. • Headquartered in Atlanta, Georgia, Acuity Brands Inc. was incorporated in 2001. Company • The company serves to retail home improvement centers, electric utilities, electrical Overview distributors, US Government and the Municipalities, OEMs, Lighting Showrooms and energy service companies. • The company acquired Distech Controls Inc. in September 2015 and expanded portfolio of Acuity Brands that integrated lighting, access controls, HVAC, closed circuit televisions and related systems • Maximum SKUs: Acuity Brands has the most extensive lighting products and services portfolio with more than 2 million SKUs. This helps customers to choose from a variety of products USP available to meet their lighting needs • Acuity brands have sales channel leadership for LED lighting and products. • Integrated Digital Solutions: The Company’s strategy to integrate digital solutions offers Acuity Brands with a single digital ecosystem that allows for end-to-end optimization of the building in all aspects including energy efficiency, seamless operations, operational cost reduction, quality visual environment and rise in digital functionality. • The Company’s strategy is to extend its leadership position in the North American market Business and certain markets internationally by delivering superior lighting and building management Strategies solutions • The Company continues to expand its solutions portfolio, including 20 software and services, to provide a host of other economic benefits resulting from data analytics that enables the “Internet of Things” (IoT) and supports the advancement of smart buildings, smart cities, and the smart grid • Lithonia Lighting, Holophane, Peerless, Gotham, Mark Architectural Lighting, Winona Lighting, Healthcare Lighting, Hydrel, American Electric Lighting, Carandini, Antique Street Brand Names Lamps, Sunoptics, RELOC Wiring Solutions, eldoLED, Distech Controls, Acuity Controls, Aculux, Juno, Indy • Principal customers include electrical distributors, system integrators, retail home improvement centers, electric utilities, lighting showrooms, national accounts, and energy service companies located in North America and select international markets serving new Major construction, renovation, and maintenance and repair applications. Customers and • In North America, the Company’s lighting and building management solutions are sold Suppliers primarily by independent sales agents, electrical distributors, system integrators, and sales representatives who cover specific geographic areas and market channels. Products are delivered directly or through a network of distribution centers, regional warehouses, and commercial warehouses using both common carriers and a company-managed truck fleet

COMPETITIVE LANDSCAPE OF MAJOR PLAYERS IN US LED LIGHTING MARKET

Parameter

Sales Split, 2016

Product Portfolio

Plant Location in the US

Recent Developments

Revenue Number of Employees

Rationale • The company generates 96% of their total revenues from North America • 50% demand for LED and other products is generated from New Construction, while the remaining is generated from Renovation • The company primarily caters to non residential sector with a sales proportion of 85%, while residential sector only generates 15% of the sales revenues • No single customer accounted for more than 10% of net sales in fiscal 2016. A single customer of the Company, The Home Depot, accounted for approximately 11% and 12% of net sales in fiscal 2015 and 2014, respectively. These sales include products for resale as well as for lighting its facilities • Acuity brands generate 60% sales from LED based luminaires. • Lighting Controls, Luminaires, Lighting Systems for Indoor and Outdoor Lighting, LEDs and OLEDs • As of August 31, 2016, the Company manufactures products in 17 facilities in North America and three facilities in Europe. Primarily, in US the company has 9 manufacturing locations. • Of total finished goods manufactured and purchased in fiscal 2016, the Company’s U.S. operations produced approximately 22%, its Mexican operations produced approximately 57%, its European operations produced approximately 3%, and finished product manufactured by others accounted for approximately 18% • Apart from manufacturing facilities, the company also has 2 warehouses, 7 distribution centers and 21 offices. • Acuity Brands introduced four types of LED architectural troffer in January 2017 which included WHSPR LCTR Troffer, WHSPR LCTR Tunable White Troffer, WHSPR Troffer and WHSPR Tunable White Troffer. • The company also introduced Wet Location Troffer, WF6 Downlight and Linear surface LEDs in December 2016 • The Company acquired DGLogik which is a provider of innovative software solutions that enable and visualize the Internet of Things. DGLogik’s solutions provide users with the intelligence to better manage energy usage and improve facility performance. • On December 10, 2015, using cash on hand, the Company acquired Juno Lighting which is a leading provider of down lighting and track lighting fixtures for both residential and commercial applications. • On September 1, 2015, using cash on hand, the Company acquired Distech Controls, a provider of building automation solutions that allow for the integration of lighting, HVAC, access control, closed circuit television, and related systems • The company generated revenue of USD 1,974.8 million from the sales of luminaires as of August 2016. • The company had 3,200 employees in the US as of November 2015.

Source: Acuity Brands Inc., Ken Research Analysis

COMPETITIVE LANDSCAPE OF MAJOR PLAYERS IN US LED LIGHTING MARKET

Figure 17-14: Financial Performance of Acuity Brands on the Basis of Net Sales in USD Million, 2011-2016

3,500

3,291.3

3,000 2,706.7

USD Million

2,500 2,000

2,393.5

1,795.7

1,933.7

2,089.1

1,500 1,000 500 0

2011

2012

2013

2014

2015

2016

Source: Acuity Brands Financial Statements

COMPETITIVE LANDSCAPE OF MAJOR PLAYERS IN US LED LIGHTING MARKET

TCP INTERNATIONAL HOLDINGS LTD. Table 17-11: Company Profile of TCP International Holdings Ltd. Including Company Overview, USP, Business Strategy, Brand Names, Product Portfolio, Subsidiaries, Plant Location in the US, Recent Developments and Total Number of Employees.

Parameter

Company Overview

USP

Rationale • TCP international Holdings Ltd. provides energy efficient lighting solutions in the form of Led lights, compact fluorescent lamps, HID lamps and halogen lamps in the lighting markets of Canada, Asia, Europe and the Americas. • The company majorly operates in three segments: LED Lamps and Fixtures, Compact Fluorescent Lamps (CFLs) and other products including halogen lighting and Linear Fluorescent Lighting (LFL) technology. • The company has the largest number of CFL and LED Energy Star compliant products and is an Energy Star partner of the US Environmental Protection Agency • The retail lighting channel in the United States and Canada is large and diverse, with products sold through a variety of retail outlets, including home centers, mass merchants, club, grocery, drug and hardware stores. The company sell their products under private labels which is turn resell them under their own brand name to end users. • The C&I lighting channel in the United States and Canada is dominated by electrical distributors, catalog houses and specialty lighting distributors. We sell our products through thousands of C & I distribution outlets, and have established a reputation for high quality products with leading distributors. • TCP’s net sales to Home Depot accounted for 24.6, 31.4% and 28.8% of consolidated net sales in 2014, 2013 and 2012, respectively. • Net sales to Walmart accounted for 19.5%, 13.0% and 10.3% of consolidated net sales in 2014, 2013 and 2012, respectively. • For 2014, 2013 and 2012, sales to commercial and industrial customers of TCP were USD 209.8 million, USD 165.8 million and USD 152.5 million, respectively, or 42.9% , 38.7% and 42.4% of the net sales, respectively. • TCP International Holdings Ltd. was founded in 1993 and is headquartered in Cham, Switzerland. • Connected by TCP: The company launched an internet based lighting system known as ‘Connected by TCP’ in 2013, wherein users can automate lighting functions merely by using a smart device from anywhere in the world. The TCP Connected system consists of a gateway, a remote control, and one or more Connected Lamps. The controlled lighting feature offered by TCP has been successfully adopted by the people of the country and allowed them to have the desired lighting effects. The Connected by TCP collection includes PAR38s, BR30s, down-light retrofit kits and general purpose A-lamp LEDs

COMPETITIVE LANDSCAPE OF MAJOR PLAYERS IN US LED LIGHTING MARKET

Parameter

Rationale

• Branded and Private Labels: TCP International Holdings Ltd. focuses on sales of TCP branded labels to the customers and offers products to the retailers who can further sell these lights under their private labels. This relation with direct customers and retailers has added to the revenues of the company overtime. • Media Campaigning: To face the competition prevailing in the lighting market of the US, the company conducts brand awareness campaigns through social media and internet marketing using interactive displays and videos to create an image in the minds of the customers. • In the future, TCP has stated that they have plans to open up their API to other developers. Business • In order to continue growing sales in the retail market, TCP is focused on expanding market Strategies share at existing accounts by expanding portfolio of lighting products, including LED lamps. The company is also targeting various utility incentive programs that offer discounts on energy efficient lamps. • TCP have partnered with utility companies, including the New York State Energy Research and Development Authority and Pacific Gas & Electric Company in the United States, to develop incentive programs to encourage end-users to adopt energy efficient lighting technology, with the utility incentive programs typically subsidizing the purchase of energy efficient lighting products. Key Customers • HD Supply, Regency, Rexel, CED and Grainger • TCP owned 26 patents issued by the US Patents Office as of December 2014 and 20 patent Patents applications are still pending. Brand Names • TCP, DuraBright, Ecosave, Fresh2, n:vision Product • LED Lightings and Fixtures, LED Chips, LED Drivers, Heat Sinks and Optics Portfolio • Bowman Lamps, LLC; Zhenjiang Qiangling Electronic Co. Ltd.; Technical Consumer Subsidiaries Products Inc.; Technical Consumer Products Canada Inc.; Shanghai Qiangling Electronic Co. Ltd. • TCP does not own any manufacturing plant in the US; rather it has four manufacturing Plant Location plants located in China. in the US • In the US, TCP lighting have 3 warehousing and distribution center, 2 sales office and one R&D and Administrative Office • Smart LED Kits: TCP introduced smart LED kits which include soft white lights that can be controlled using smart phones. Almost all LED functions can be controlled using the Recent handheld device which has diversified the lighting market of the country. Developments • ColorSpree: The new LED lighting technology from TCP includes the ColorSpree A-Lamp bulbs which can illuminate any color in RGB spectrum. These bulbs can adjust to various color temperatures and can even be made sync with music. Number of • The company had 300 employees in the US and Canada as of December 2014. Employees • TCP 60W Equivalent Soft White A19 Non-Dimmable LED Light Bulb • TCP 65W Equivalent Day Light BR30 Non-Dimmable LED Flood Light Bulb Best Selling • TCP 40W Equivalent Daylight (5000K) Blunt Tip Candelabra Deco LED Light Bulb Products • TCP 40W Equivalent Soft White (2700K) Blunt Tip Medium Base Deco LED Light Bulb • TCP 60W Equivalent Daylight A19 Non Dimmable LED Light Bulb Source: TCP Financial Statements, Ken Research Analysis Best selling products have been compiled as the first five best selling product from Home depot as on 6th April 2017 © Licensed product of Ken Research; should not be copied

COMPETITIVE LANDSCAPE OF MAJOR PLAYERS IN US LED LIGHTING MARKET

Figure 17-15: Financial Performance of TCP International Holdings Ltd. on the Basis of Net Revenues from Sale of LED Lights in the US in USD Million, 2012-2014

200 162.2

USD Million

150

100

88.3

50.0

2012

2013

2014

Source: TCP Financial Statements Figure 17-16: Financial Performance of TCP Lighting on the Basis of Contribution of Revenues from US in Percentage (%), 2013-2015

100% 88.4% 82.4%

85.1%

USD Million

80%

60%

40%

20%

2012

2013

2014

100

US LED LIGHTING MARKET FUTURE OUTLOOK AND PROJECTIONS BY REVENUES, 2017-2021 Table 18-1: Future Outlook for the US LED Lighting Market on the Basis of Revenues, 2017 -2021

Outlook Period

Rationale

Short/Medium Term (2017 – 2019)

• LED lighting market in the US is expected to increase with a CAGR of 27% in between 2017 and 2019 in terms of revenue due to elevating demand for energy saving electrical products and appliances in the country. • The increasing awareness towards environmental issues caused by the radiations and heat emitted by traditional lighting technologies will make more people shift to LED lights from fluorescent lights, thereby expanding the overall LED lighting market of the US. • The increasing use of LED lights during the outlook period will be the major reason responsible behind the growing efficacy of LED lamps to almost 253 lumens per watt and 258 lumens per watt for warm white and cool white LEDs respectively. • By 2019, the LED lighting industry of the US is expected to generate a revenue share of 25.3% in total lighting sales of the country, where the same industry captured a share of 38% of the total lighting sales in 2016 • LED lighting system which is intelligent and efficient will be the future for LED segment. • Advances in production improved efficiency and light output of commercial LED lights, while lowering costs. The LEDs produced today are over twice as efficient as some produced only five years ago. This trend will continue and LED efficacy will go up as production costs go down. This rapidly developing field not only brings new technology to consumers but also brings new producers to the technology.

US LED LIGHTING MARKET FUTURE OUTLOOK AND PROJECTIONS

101

Outlook Period

Rationale

• US LED lighting market revenue is expected to grow at a rapid pace with a significant from 2019 to 2021 owing to the rising number of players entering the LED lighting industry and efforts of the Government to shift people to energy saving technologies. • In long term, the LED lighting market will witness innovative products being introduced which will lead to an increase in demand by the population, thus making the LED industry contribute a larger share to the total economy of the country. • In addition to that, the increase in import quantities of LED lights by the US from China and other technologically advanced economies of the world will create Long Term more distributors in the country which can cater to the local demand of the US. Outlook • Growing infrastructural developments in the country will add to the sales (2020-2021) of indoor LED lights whereas outdoor LED lighting segment will witness the maximum growth with mire number of lights being purchased by government for the expanding roadway lighting network in the country. • Fluorescent lighting manufacturers will shift their production to LED lights with the ongoing expansion in the market for energy saving lights in the country • U.S. manufacturers have been moving operations overseas for decades to capture lower production costs and secure necessary materials. Long-term manufacturing trends are unclear given major efforts in China and other Asian countries to increase production. • Today, it is estimated that 200 new companies per month begin manufacturing LED products. This number will continue as technology advances and LED lighting becomes more prominent • LED lighting manufacturers would expand in size and number, offering more products to customers, along with providing awareness about the low cost benefits that will act as the drivers for increase in customers purchasing LED lights. • More companies getting them registered with Energy Star will fuel the growth of LED lights in the US • Increased efficiencies, improved light output, and lower production costs will help to pave the road for the commercial success of all LEDs. This success will in turn relieve stress from burdened electrical infrastructure and enable renewable energy resources to more easily fit into the daily lives by reducing the overall demand Key Opportunities • Within the next three years, it is believed that commercial LED efficacy pass the for Future 200 lumens per watt mark. This level of efficiency, especially when compared to the 35 lumens per watt attained with incandescent bulbs, shows that the future for solid state lighting is certainly bright • Street lighting alone is the biggest line item on a municipality´s utility bill, accounting for 10 to 38% of a municipality´s budget. In the US alone, an estimated 26.5 million public streetlights consume as much electricity as 1.9 million households, and generate greenhouse gas emissions equal to those produced by 2.6 million cars. Increasing the energy efficiency of street and public lighting therefore stands to have an immense impact on the overall sustainability of our societies. Source: Ken Research Analysis

US LED LIGHTING MARKET FUTURE OUTLOOK AND PROJECTIONS

102

Figure 18-1: Future Outlook and Projections for the US LED Lighting Market on the basis of Revenues in USD Million, 2017-2021

25,000

23,559.9

19,535.6

20,000

USD Billion

16,012.8 15,000 12,779.5 10,000

9,929.7

5,000

2017

2018

2019

2020

2021

Source: Lighting Science Group Corporation Financial Statements, Ken Research Analysis Figure 18-2: Projected Efficacy of LED Lamps in US by Lamp Type (Lumens per Watt), 2015 and 2020

300 258.0

253.0

250

Lumens Per Watt

224.0 200

202.0

150

100

2015 Warm White

2020 Cool White

Source: Lighting Science Group Corporation Financial Statements, Ken Research Analysis Â© Licensed product of Ken Research; should not be copied

US LED LIGHTING MARKET FUTURE OUTLOOK AND PROJECTIONS

103 BY TYPE OF LED, 2021

Figure 18-9 3: Future Outlook and Projections for the US LED Lighting Market by Type of LEDs on the basis of Revenues in Percentage, 2021

1.8%

2.2%

0.8%

LED Directional

4.2% 5.0%

33.2%

9.8%

LED A-Type LED Linear Fixtures Building Exterior LED Decorative Area/Roadway LED

11.7%

China 14.7%

16.6%

LED Small Directional Parking Lot LED LED Low/High Bay

Source: Ken Research Analysis Table 18-2: Future Outlook and Projections for the US LED Lighting Market by Type of LEDs on the basis of Revenues in USD Million, 2021

LED Type LED Directional LED A-Type LED Linear Fixtures Building Exterior LED Decorative LED Parking Garage Area/Roadway LED LED Small Directional Parking Lot LED LED Low/High Bay •

• • • •

Revenues (USD Million) 8,717.2 4,476.4 3,062.8 2,591.6 1,884.8 942.4 589.0 541.9 471.2 282.7

Key Takeaways LED directional lights will continue to dominate the market due to the rising demand for spotlights and multi-directional lights by the residential and growing commercial sector in the US. The growing commercial sector which highly relies on the use of directional LEDs for various purposes will augment the growth of such lights during the outlook period. The revenues for A-Type LED bulbs will increase overtime due to the simplicity of installation and the low cost of such lights over other LED lights available in the market. Infrastructural developments in the US will lead to increasing demand for building exterior LED lights over other LEDs used for outdoor purposes. The market will witness an increase in the revenues of Roadway LEDs which are highly demanded by the government of the country to replace the fluorescent lights on highways and streets with LED lights, thus saving both energy and expenses of the government. Parking lots being owned by private individuals will witness a slow growth as ceiling height is not considered to be much suitable to install LED lights and luminaires in such spaces.

Source: Ken Research Analysis

US LED LIGHTING MARKET FUTURE OUTLOOK AND PROJECTIONS

104

BY USAGE, 2021 The increasing use of LED lights for outdoor purposes, typically for street and roadway lighting will augment the demand for these lighting technologies in the future, owing to the expanding road network of the country. However, the use of LED technology for outdoor lighting is rising, but at present it faces barriers common to many ascending technologies: insufficient awareness of its advantages, reluctance to make the initial investment required, and a lack of clear performance standards. The market for indoor LEDs has already been acquired to a large extent and new innovative products will drive the market for indoor LED lights in the country. The increasing use of linear fixtures and decorative LEDs due to infrastructural developments in the country will shape the overall market for indoor lighting installation.

Figure 18-4: Future Outlook and Projections for the US LED Lighting Market by Usage (Indoor/Outdoor) on the basis of Revenues in Percentage, 2021

22.8%

77.2%

Indoor Outdoor Source: Ken Research Analysis

ÂŠ Licensed product of Ken Research; should not be copied

US LED LIGHTING MARKET FUTURE OUTLOOK AND PROJECTIONS

105

BY PRICE, 2035 The adaptability of the people to LED lights has raised their demand for such energy saving lighting products available in the country. This has led to more manufacturers entering the market either by setting

up their own plants or by acquiring small players and component manufacturers. The increased supply to meet the demands of the people is set to lower the prices of LED lights in the future.

Table 18-3: LED Lights and Luminaires Prices in USD, 2020 - 2035

LED and Luminaire Type

2020

2025

2030

2035

A-Type Lamps Downlight - Large Downlight/Track - Small Track Lighting - Large Linear Fixture - <4ft Linear Fixture - >4ft Linear Fixture - 4ft Low and High Bay Decorative Area and Roadway Parking Lot Garage Building Exterior Downlight/Track - Large Downlight/Track - Small Linear Fixture - <4ft Linear Fixture - 4ft Linear Fixture - >4ft Low and High Bay Decorative Area and Roadway Parking Lot Garage Building Exterior

4 12 13 15 8 7 9 17 8 15 15 13 13 27 36 27 25 37 17 50 25 23 23 25

3 9 10 12 5 5 6 13 6 12 12 11 10 19 25 22 21 25 13 41 18 16 15 16

3 8 9 10 4 4 5 11 6 11 11 10 8 15 21 20 18 20 12 37 15 14 12 13

3 7 9 8 4 3 4 10 5 10 10 10 7 14 18 18 17 17 11 34 13 12 10 11

Source: US Department of Energy, Ken Research Analysis

US LED LIGHTING MARKET FUTURE OUTLOOK AND PROJECTIONS

106

UPCOMING TECHNOLOGIES IN THE LIGHTING MARKET Table 18-4: Rationale for Upcoming LED Technologies in the Lighting Market of the US

Upcoming Technology

Rationale

• Crystalline Substances known as the Perovskites are expected to shape the future of LED lighting market of the US. LEDs with Self- • The nanoscale perovskites particles installed in the LED lights will self assemble so that more Assembling efficient and stable perovskites LEDs can be produced. Particles • Considering as the most suitable alternative to existing LED technologies, these particles are low cost materials used in the manufacturing lights and are typically meant for commercial applications including lasers, televisions, lightings and computer screens. • The increasing demand for LED lights due to their energy saving benefits has led to the evolution of lighting industry, wherein Acandescence technology is expected to take over the current demand for light emitting diodes. • Finally Light Bulb Company of Boston introduced Acandescence technology which is both Acandescence inexpensive and energy efficient than the LED lights available in the market. Technology • The technology uses three inch antenna which is wrapped by copper wire creates magnetic field in the bulb. • The latest bulbs introduced with this technology are expected to be 75% more efficient and will last 15 times longer than the incandescent lights. • The Field Induced Polymer Electroluminescent (FIPEL) is one of the significant lighting technologies that are expected to surpass the use of LED lights in the future. • Developed by the researchers of Wake Forest University, USA, these light emit soft and white glow along with a sharp hue of LED lights. FIPEL • FIPEL makes use of the small amount of nanomaterials which glow the multi layered white-light Technology emitting polymers with the help of an electric charge. • The tunable light of FIPEL can be adjusted depending upon the required brightness and colors which makes it suitable for the human eye. • The long lasting technology of FIPEL makes it more durable and reliable than the LED lights available in the market. • Laser Diodes, which have compelling benefits over LEDs are expected to replace the use LED lights, typically for indoor purposes. • Delivering more lumens per watt along with faster light emitting technology than LEDs makes Lasers laser diodes the future of lighting market in the US. • Replacements of numerous bulbs installed in ceilings and other fixtures with colored lasers that require the minimal space are expected to generate higher demand for these diodes in the future. • Intelligent LED lighting systems depend on the intelligent controls of the LED drivers installed in the lights. • Traditionally LED drivers were merely meant for switching on and switching off the lights, whereas this scenario has witnessed changes over time. Multi-String • Lighting market of the country is expected to come up with innovative LED drivers that could have LED Drivers multiple LED strings installed in them. • Fault in one string will divert electric current to the other, thereby leading to a balance between the strings so that the current ratio is kept identical. • This technology will enhance the durability of the lights against the damage or fault in parallel LED strings. Source: Ken Research Analysis © Licensed product of Ken Research; should not be copied

US LED LIGHTING MARKET FUTURE OUTLOOK AND PROJECTIONS

107

ANALYST RECOMMENDATIONS Table 18-5: Analyst Recommendations for US LED Lighting Market

Recommendations Rationale

Implementation

Awareness among Customers about LED Lights

• The developed economy of the US has still various opportunities to be tapped by the LED light manufacturers in order to create more customers. Most people still rely on fluorescent lighting over the use of LEDs in the country.

Acquisitions, Mergers, and Business Alliances

• The market has experienced consolidation in recent years. Business alliances and acquisitions in future are also expected to increase the revenue share of established players in future.

Increase the Role of OEMs

• The US LED lighting market is highly fragmented as a large number of players are aggressively competing in order to attain higher market shares. Additionally, the industry is quite dynamic thereby increasing reliance on innovation.

• LED light manufacturers and sellers in the US should focus on creating marketing campaigns such as advertisements, distributing free samples, organizing camps that can spread awareness among the untapped population of the country about the benefits of using LED lights over traditional lighting sources. • LED manufacturing companies can seek the support of the Government wherein it will be easy for them to get the database of the population using LED lights and the demand for energy saving sources of electricity. This database will provide them the areas and sectors where the company has to focus to gain market leadership. Additionally, advertisements and programs on different marketing media will help the companies in expanding their customer base. • Major players in the LED lighting market of the US should acquire small manufacturers in the country. This will help them in getting the ready manufacturing facility and customers which are associated with the company. Further, LED manufacturers must tie up with various corporate houses and real estate players which will increase the sales of their LED lights to be fit in the buildings. • Original Equipment Manufacturers must be considered crucial to gain a position in the market. New entrants in the market looking to venture into the branded segment may face difficulties in brand building due to the presence of renowned players in the market. Thus, players with a robust manufacturing base may act as Original Equipment Manufacturers in order to play a significant role in the industry.

US LED LIGHTING MARKET FUTURE OUTLOOK AND PROJECTIONS

108

Recommendations Rationale

Implementation

Focus on Local Manufacturing

• The US LED lighting market is still dependent on China for purchasing LED chips, lights and other related components at cheaper prices. China being their largest exporter has still a large share in the sales of LED lights in the US.

Using Technology to Provide New Age Experience to Customers

• In the wake of growing competition, the companies should introduce their product offerings by using newer technologies that can provide a new age hold to experience to their customers.

Increased Budgets for Customer Education to Mitigate Confusion

• • With the rapid evolvement of new LED products and frequent changes in government regulations, it is imperative to increase budgets for customer education that can help to mitigate confusion among minds of consumer

• The technologically advanced economy of the US must focus on increasing their own manufacturing facilities and promoting local manufacturers’ products in the country. Though Chinese lights are prefer in terms of their low cost but dominant market players with significant manufacturing base can produce their own lights in the US which will confirm to the quality standards of the country. This can be achieved by incentivizing the local manufacturers in the form of tax incentives, discourage corporate evasion by reducing federal corporate tax rates, incentivize demand side by providing tax incentives for the private sector to purchase goods that are locally manufactured. • Companies should emphasize on new designs of LED lights and luminaires that can be used in different environments depending upon the purpose. Higher lumens in a compact size LED will help them increase their revenues. Additionally, luminaires should be introduced with pre-fitted LED lights which could be installed easily. For Instance, Cree offers lights with exact luminaire sizes that are ready to install. • New standards coming into force and new technologies promoted by efficiency programs mean that consumer confusion will be high even with new Federal Trade Commission (FTC) labeling requirements, which focus on lumens instead of watts. Efficiency programs can play a critical role in ensuring consumers get the right bulbs in the right sockets. Programs can take advantage of existing consumer education materials, or develop their own. Increased consumer education and awareness will minimize consumer frustration when shopping for light bulbs, and maximize adoption and persistence of new technologies.

109

MACROECONOMIC INDICATORS AFFECTING US LED LIGHTING MARKET ELECTRICITY CONSUMPTION IN THE US, 2011-2021 Table 19-1: Rationale for Electricity Consumption in the US, 2011 - 2021

Period

CAGR

Rationale

2011-2016

0.1%

2016-2021

0.1%

The US, which comprises of 5% of the worldâ&#x20AC;&#x2122;s population, consumes about 25% of the global energy. However, the electricity consumption in the country has significantly increased at a declining rate over the years due to the energy efficiency policies and programs which have been successful in promoting the use of LED lights for saving energy. With more people shifting to the use of LED lighting techniques, the electricity consumption in the US has registered a mere CAGR of 0.1% between 2011 and 2016. The future portrays bright outlook for LED lighting market in the US. The electricity consumption is likely to grow further with an increased demand guided by population growth. This will further necessitate the government to launch new schemes for energy efficiency, which will drive sales of LED in the future.

Source: Ken Research Analysis Figure 19-1: Electricity Consumption in the US on the basis of Kilowatt Hours in Billions, 2011 - 2021

3,800 3,776.5 3,772.7 3,768.9

Kilowatt Hours (Billion)

3,772

3,753.9 3,753.1 3,750.2 3,746.5 3,745.4 3,739.0

3,744 3,726.7 3,716

3,704.4

3,688

3,660

2011 2012 2013 2014 2015 2016 2017E 2018E 2019E 2020E 2021E

Source: US Electricity Department

ÂŠ Licensed product of Ken Research; should not be copied

MACROECONOMIC INDICATORS AFFECTING US LED LIGHTING MARKET

110

REVENUES FROM PARKING LOTS AND GARAGES IN THE US, 2011-2021 Table 19-2: Rationale for Parking Lots and Garages in the US, 2011 - 2021

Period

CAGR

Rationale

2011-2016

1.9%

2016-2021

2.0%

Increasing number of parking lots and garages at a CAGR of 1.9% was one of the major reasons behind the growth of LED lighting market in the US. The revenues from parking lots and garages have increased from USD 9.5 Billion in 2011 to USD 10.4 billion in 2016. There has been a significant growth in the area occupied by these commercial spaces in the country. Parking lots and garages typically use LED lights and their increasing number has led to the expansion of energy saving lights market in the US. The revenues from parking lots and garages by the end of 2021 are expected to be reported at USD 11.5 billion. The growing number of vehicles in the country demands for more garages and parking lots. With the increase in revenue due to the rising number of spaces for parking lots and garages, the overall LED lighting markets will be driven in a positive manner due to surge in demand for such lights in the future. Parking lots and Garages in the country are expected to increase at a CAGR of 1.8% during the outlook period.

Source: Ken Research Analysis Figure 19-2: Revenues from Parking Lots and Garages in the US in USD Billion, 2011 - 2021

9.5

9.6

9.8

10.0

10.2

10.4

10.7

10.9

11.1

11.4

11.5

USD Billion

2011 2012 2013 2014 2015 2016 2017E 2018E 2019E 2020E 2021E

Source: Statista, Ken Research Analysis

ÂŠ Licensed product of Ken Research; should not be copied

MACROECONOMIC INDICATORS AFFECTING US LED LIGHTING MARKET

111

HOUSING SALES IN THE US, 2011 - 2021 Table 19-3: Rationale for Housing Sales in the US, 2011 - 2021

Period

CAGR

Rationale

2011-2016

13.0%

2016-2021

8.1%

The housing sales in the US hit record of eight year high sales with 563,000 units sold in 2016. Housing sales in the country increased at a CAGR of 13.0% during 2011 â&#x20AC;&#x201C; 2016. Increasing demand for residential property in the US due to growing population and migration of people from other parts of the world to the US has further led to a rise in the market for LED lights as customers preferred energy saving techniques over traditional forms of electricity to cut their expenditures. With the rise in sales of houses, the LED lights market of the country was driven to a great extent wherein people started using modern techniques of energy and lighting systems which reduced their electricity consumption. The demand has been generated in the form of new demand and replacement demand. Housing sales in the US are expected to rise by 6.9% in terms of units sold between 2016 and 2021. With more number of people opting for residential places, the demand for LED lights in the country is expected to rise, thereby making a positive impact on the overall market.

Source: Ken Research Analysis Figure 19-3: Housing Sales in the US on the Basis of Units Sold in Thousands, 2011 - 2021

1,000

800

736.3

USD Billion

636.8 600

787.1

831.2

672.4

563.0 501.0 429.0 437.0

400

368.0 306.0

200

2011 2012 2013 2014 2015 2016 2017E 2018E 2019E 2020E 2021E

Source: US Census Bureau, Ken Research Analysis

ÂŠ Licensed product of Ken Research; should not be copied

MACROECONOMIC INDICATORS AFFECTING US LED LIGHTING MARKET

112

HOUSEHOLD DISPOSABLE INCOME IN THE US, 2011 - 2021 Table 19-4: Rationale for Household Disposable Income in the US, 2011 - 2021

Period

CAGR

Rationale

2011-2016

2.7%

2016-2021

1.9%

Rise in disposable income of the country at a CAGR of 2.7% between 2011 and 2016 has proved to be the most crucial factor behind the increasing sales of LED lights in the US. LED lights are considered expensive than other electricity devices and are thus impacted with the disposable income of the countryâ&#x20AC;&#x2122;s population. Growing disposable income from USD 35,924.6 billion in 2011 to USD 41,071.0 billion in 2016 increased the purchasing power of the customers to shift to energy saving LED lights, thereby driving the overall market. It has been observed that the household disposable income will increase to USD 46,693.2 billion by 2021, increasing at a CAGR of 2.5% between 2017 and 2021. This will make customers buy more LED lights despite of their high prices due to the increased purchasing power of the population. More money in the hands of people will augment the growth of LED lights market in the US.

Source: Ken Research Analysis

Figure 19-4: Household Disposable Income in the US in USD Billion, 2011 - 2021

50,000

40,000

USD Billion

35,925

37,074 38,001

39,531

41,355 41,071

42,221

43,572

44,661 45,510

46,693

30,000

20,000

10,000

2011 2012 2013 2014 2015 2016 2017E 2018E 2019E 2020E 2021E

Source: Organization for Economic Cooperation and Development, Ken Research Analysis

ÂŠ Licensed product of Ken Research; should not be copied

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113

AVERAGE PRICE OF LED LIGHTS IN THE US, 2011 - 2021 Table 19-5: Rationale for Average Price of LED Lights in the US, 2011 - 2021

Period

CAGR

Rationale

2011-2016

-20.4%

2016-2021

-8.1%

The expansion in LED lighting market overtime with the acceptability by the US population has led to the decreased prices for such energy saving techniques in the country. Competitors entering the industry which cater to the demands of the people with similar products have further lowered the prices for LED lights in the US, thus making the public switch to these lights as they are offered at cheap prices than years before. Prices have also reduced overtime due to the advancements in technology, which is making the available technology obsolete. Furthermore, the large stocking for LEDs in China has further aggravated the decline in prices for LED. Thus, such products which are no more competing with the latest lighting technology are offered at a lower price. The A9 60W LED light was sold for USD 8 in 2016 as compared to USD 25 in 2016. The market is expected to witness a further decrease in prices, with A9 60W LED light being offered for USD 5.4 in 2021. This will make LED lights affordable for the public and will help them switch to such lights from their normal and regular means of lighting and electricity.

Source: Ken Research Analysis Figure 19-5: Average Price of LED Lights in the US in USD, 2011 - 2021

26.0 25.0

Per Unit Price (USD)

20.8 17.0 15.6

10.4

15.0

10.0

9.0

8.0

7.4

5.2

6.9

6.5

5.9

5.4

2011 2012 2013 2014 2015 2016 2017E 2018E 2019E 2020E 2021E

Source: US Energy Department, Ken Research Analysis Note: Prices stated are for A9 60W LED Light in the US market. E refers

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RESEARCH METHODOLOGY MARKET DEFINITIONS US LED Lighting Market: The market for LED lighting has been defined as the total domestic sales for general LED lighting, computed at the retailer’s price level. The market comprises with the sales from Lamps and luminaires on the basis of type of LED and Indoor & Outdoor applications. The revenues only include LED lighting used for the application such as LED A-Type, LED Decorative, LED Directional, LED Small Directional, LED Linear Fixtures, and LED Low/High Bay, Area/Roadway LED, Parking lot

LED, LED Parking Garage and Building exterior. The independent (open market) sales of LED components have not considered under the market size. US Indoor LED Market: US Indoor LED market includes the applications of LED in residential, commercial and industrial sector within the US US Outdoor LED Market: US Outdoor LED market includes the applications of LED in building exterior, Area/Roadway, Parking lot and Parking garage within the US

ABBREVIATIONS LED: Light Emitting Diodes

FEMP: Federal Energy Management Program

CFLs: Compact Fluorescent Lights

EISA: Energy Independence and Security Act

HID: High Intensity Discharge

OEMs: Original Equipment Manufacturers

UV: Ultraviolet

FTA: Free Trade Agreement

IR: Infrared

NAFTA: North American Free Trade Agreement

GE: General Electric

MFN: Most Favored Nation

ESCO: Energy Saving Company

COB: Chip-on-Board

LSGC: Lighting Science Group Corporation

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RESEARCH METHODOLOGY

MARKET SIZE AND MODELING APPROACH – MARKET SIZING Hypothesis Creation: The research team has first framed a hypothesis about the market through analysis of existing industry factors obtained from magazines, journals, broker reports, investor presentations and annual reports of major companies and several articles. The team has used both public and proprietary databases to define and collect each market data point such as overall market revenue, and individual share of each product segment and revenues of companies. Hypothesis Testing: The research team has conducted multiple computer assisted telephonic interview (CATI) with several industry professionals including decision makers in LED lighting market. The industry professionals included several retailers and players of the US LED lighting markets, management executives, and financial analysts of Cree, Philips, LSGC, Osram, General Electric, TCP and Acuity Brands. The analysts at Ken Research collated their insights on the market onboard and to seek justification to the hypothesis framed by the team.

factors which were considered in report include electricity consumption in the US, Parking lots and garages in the US, household disposable income of the US, housing sales in the US, and average price of LED lights in the US. The projected numbers were further confirmed from the industry veterans from Cree, Philips, LSGC, Osram, General Electric, TCP and Acuity Brands. These interviews helped the research team to authenticate the data collected from secondary data sources and to reject or accept the hypothesis regarding the future projections. Interpretation and Proofreading: The final analysis was then interpreted in the research report by our expert team well versed with the electronics and lighting industry. MARKET SIZING- US LED LIGHTING MARKET • Total LED lighting market revenue was identified from various sources such as company annual reports, investor presentations, broker reports, whitepapers, and business articles.

• The share of major market players operating in the market is calculated through bottom-up approach. Sanity Checking: General consensus on data collected from primary research and public and • Reports for Energy Bureau were considered to get proprietary databases has been reached by conducting the total installations of LED lights in the US along in-house decision tree analysis of the data points with the price for each type of light. The product of available and by comparing it with macro-economic number installations of each type and their price factors. Data has been collected and verified through was used to estimate the market size. cross-sanity checking between primary and secondary • Revenue of LED lighting market players – Cree, sources. Secondary data sources include the analysis Philips, LSGC, Osram, General Electric, TCP and of existing industry factors, obtained from company Acuity Brands for 2015 and 2016 was analyzed reports and from magazines, journals and online through secondary research, company report from articles. The secondary data sources are used to form ministry of corporate affairs and also by conducting the initial perception and contention on several forces Interviews with the company management. playing their role in determining the future growth in VARIABLES (DEPENDENT AND INDEPENDENT) the industry. Future Forecasting: The future of the US LED Reasons for the selection of the independent variables: Lighting market was forecasted on the basis of future • Electricity Consumption in the US: The plans of major lighting players operating in LED electricity consumption in the country will have industry in the US. In addition to that the growth in a direct impact on the sales of lighting products. the macroeconomic factors was accounted before Increase in electricity consumption will lead to projecting the total revenue of the LED lighting market more demand of LEDs and other energy efficient during the forecast period. The macroeconomic lighting techniques.

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RESEARCH METHODOLOGY

• Parking Lots and Garages: The growing number of parking and garages revenues will imply more of parking lot and garage space in US. This has a direct implication on the sales of LED lights for such parking lots.

In the present case, US LED lighting market revenue has been taken as the dependent variable and other variables such as electricity consumption, parking lot and garages, housing sales and household disposable income have been taken as independent variables.

• Housing Sales: The sale of LED lights in the US increases with the expansion of residential spaces. With more housing sales, people will demand more lights, which will drive the LED lighting market.

MULTI FACTOR BASED SENSITIVITY MODEL

• Housing Disposable Income: Household disposable income is a major driver of the market, wherein the demand for relatively expensive LEDs over traditional lights directly varies with the increased household income of the country. The report applies Correlation and Regression analysis methods to forecast the future of the US LED lighting market. The capabilities of SPSS and predictive analytics software have been leveraged to determine the relevant indicators used for forecasting this industry.

The model first identifies the correlation (whether linear or non-linear) between the dependent and independent variables. After calculating the degree and strength of relationship between the variables, the regression model is used to calculate the sensitivity of each factor on the dependent variable. Finally, the expected value and sensitivity of the independent variable is used to determine the future value of dependent variable. However, we have not considered the SPSS value as our forecast values. For future value, we conducted several telephonic interviews with industry participants and have calculated value on the basis of responses.

Table 20-1: Correlation Matrix for the US LED Lighting Market

USD LED Lighting Market (in USD Million) Pearson US LED Lighting Correlation Market (in USD Sig. (2-tailed) Million) N Pearson Electricity Correlation Consumption (In Million Sig. (2-tailed) KWH) N Pearson Parking Lots Correlation and Garages (in USD Sig. (2-tailed) millions) N Pearson Correlation Housing Sales (in millions) Sig. (2-tailed) N Pearson Household Correlation Disposable Income (in USD Sig. (2-tailed) millions) N

Parking Electricity Lots and Consumption Garages (In Million (in USD KWH) millions)

Housing Sales (in millions)

Household Disposable Income (in USD millions)

.670

.976

.952

.987

.145 6

.001 6

.003 6

.000 6

.670

.708

.677

.681

.145 6

.115 6

.140 6

.136 6

.976

.708

.988

.994

.001 6

.115 6

.000 6

.952

.677

.988

.989

.003 6

.140 6

.000 6

.987

.681

.994

.989

.000 6

.136 6

.000 6

Source: Ken Research Analysis Notes: Correlations are significant at the 0.05 level (2-tailed). © Licensed product of Ken Research; should not be copied

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RESEARCH METHODOLOGY

From the correlation table, we can conclude that: • Household Disposable Income of the US has been the strongest factor with a correlation value of 0.987. • Number of parking lots and garages has influenced the LED lighting market of the US positively with a correlation value of 0.976. • Housing sales in the US is also a strong factor impacting the LED lighting market with a correlation value of 0.952 • Electricity consumption will have a positive correlation of 0.670 with the US LED lighting market revenues. REGRESSION MATRIX A multiple regression model has been used through SPSS statistical tool that analyzes the multiple correlation coefficients, R, its square, and an adjusted version of this coefficient as summary measures of model fit. Further, R-Square is used to explain the validity of the independent variables. R Square, also known as the coefficient of determination, represents the proportion of total variation in the dependent variable explained by the variation in the independent factors. Applying multiple regression analysis to a set of data leads to regression coefficients, one for each explanatory variable. These coefficients give an estimated change in the response variable associated with a unit change in the corresponding explanatory variable, conditional on the other explanatory variables remaining constant. Table 20-2: Regression Coefficients Output

Model (Constant) Electricity Consumption (In Million KWH) Parking Lots and Garages (in USD millions) Housing Sales (in millions) Household Disposable Income (in USD millions)

Unstandardized Coefficients B Std. Error

Standardized Coefficients Beta

-66080.938

18397.948

.002

.005

.012

-.978

2.022

-.139

-28435.146

5166.852

-1.036

.002

.000

2.142

Source: Ken Research Analysis Dependent Variable: US LED Lighting Market Revenues in USD Million

LIMITATIONS • There might be a case that the chief executives / representatives might be bullish with the numbers. We have cross checked and revalidated the data, collected with our hypothesis and question them on the numbers. But in the end, justification provided by a primary might/might not be satisfactory on the numbers as there is no right mechanism to revalidate their numbers. Henceforth in this scenario, the team had to apply a discounting factor to the numbers decided through interviews conducted from other industry representatives since it appeared bullish to our logical thought process. FINAL CONCLUSION The conclusion regarding the expected value of dependent variable is determined by using weighted average of the output of subjective judgment, primary research and opinions polls since the regression model has been rendered inaccurate with high standard deviation. The weighted average method enables us to filter out the possible noise in each computation method and help us to derive the best possible future projections. However, the study of survey did not support the SPSS results and the final values were decided on the basis of interviews with industry professionals. © Licensed product of Ken Research; should not be copied

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