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Please provide an overview of major manufacturers in the lighting industry. Especially interested in LED lighting.
Hello and thank you for using Wonder. I received your request for information on major manufacturers in the lighting industry, with a focus on LED products. Information on this topic is somewhat jumbled, but the bottom line is that the "traditional" market leaders- General Electric and Osram- continue to occupy a dominant position, however this is quickly being eroded by Chinese competitors like MLS and Nichia. There is a significant difference in business models, with the older European and American companies preferring a strategy of vertical integration, while their Asian competitors have shown a marked preference for reducing costs through the use of independent suppliers.
STATE OF THE INDUSTRY
The list of top manufacturers, based on revenue, varies among sources although certain players such as Philips, Cree, Osram, and Samsung are consistently included. The fact is that the industry is changing rapidly and big players such as Philips and Osram are selling off certain units. In addition, large manufacturers from China are quickly building their business to compete with the longstanding giants. As of 2015, their production volume among manufacturers stood at 40%.
LED technology is seen as the key to the future, as older lighting is reduced to a commodity. LEDinside, a research division of TrendForce, projected that LED lighting market penetration will reach 31% of the $82.1B global lighting market in 2015. LEDinside also reported that Europe is the largest geographic market segment—accounting for 23% of the global lighting market share, followed by China at 21% and the U.S. at 19%. Statista reports that LED penetration may be 61% by 2020. (McKinsey forecasts a more conservative 45%.)
As Asian manufacturers take erode the profits and market share from the likes of Phillips and Oscram, the business is likely to become more fragmented, as the barriers to entry are quite low. The cost of the technology required for LED lights is falling every year, allowing new entrants to start from a lower price base than established competitors. In 2014, the top three Chinese manufacturers had a combined 46% market share, and in 2015, that had declined to 38%.
The largest industry players in LED lighting are, of course, able to take advantage of economies of scale: their size gives them the greatest purchasing power and the ability to fulfill the requirements of large clients. As with many industries, newer companies have an edge when they focus on niche products that are less price-sensitive and offer unique features and benefits. Cree, although hardly a small industry player, are a great example of a company that has preferred to rely on its perceived quality difference in order to differentiate itself in the market.
TOP MANUFACTURERS
EUROPE AND THE U.S.
General Electric - No name is as closely associated with electronic products as GE. Founded by Thomas Edison, it has always been a massive player in the lighting industry.
Despite its longstanding position and brand recognition, GE has not been immune to market dynamics. It has spun off other businesses in order to focus on higher margin items, and there are rumours that it will do the same with its lighting division. Its growth has also been hampered because it was a late entrant into the LED market, although they did introduce a wider range of LED products in 2014.
Philips - The Dutch manufacturer is still a predominant force in the market, including within the newer technology of LED lighting. To enter this market, they acquired Lumileds in 2006. While the business was still gaining traction at that time, the time, today it comprises 40% of their lighting purchases.
Philips has traditionally controlled its own manufacturing with vertically integrated facilities, however, in 2014, they began to outsource production to OEM manufacturers. In the third quarter of that year, they announced that they were splitting their lighting business in two, HealthTech (healthcare and lifestyle products) and Lighting Solutions, which becomes a subsidiary company.
Osram (Sylvania) - Based in Germany, this company was founded in 1906, as Deutsche Gasglühlicht-Anstalt. It made its name through two of the elements used in its incandescent lamps, which they manufactured internally. In 1919, they merged with Auer-Gesellschaft, AEG and Siemens & Halske and became Osram. In 1976, Siemens completed its purchase of shares from other shareholders, thus becoming the sole owner. Since that time, Osram has transitioned to a subsidiary of Siemens.
Osram has long been a manufacturer of basic light bulbs, and at its peak possessed a 30% share of the world market. However, they have yet to make a foray into the LED business.
In response to falling profits, Osram decided in 2015 to divest itself of its general lighting division, retaining only its "specialized lighting, automotive lighting, LED components and Osram Opto products" for internal production. This decision was based on the fact that 2014 revenues dropped 15% from 2013, to $298.02M from the previous year and EBITA was below acceptable levels.
Cree - Although not a household name, Cree is now the third largest light bulb manufacturer in North America. It has traditionally controlled every aspect of production, down to the LED chips. Indeed, their market advantage has been their position as a semiconductor manufacturer.
Cree is not only a supplier of LED lighting, but also the chips required to make it, which puts them in the difficult position of current clients becoming future competitors. The quality of their product is undisputed, but many of their items are incompatible with mass technology, which limits their potential sales. In fact, despite their advantages, they are one of the only companies to see a decline in LED sales as a percentage of their overall total. Nonetheless, they are a company with an advantage based on their quality focus, a niche which no other manufacturers have moved to occupy.
CHINA
MLS - While there have been many Chinese entrants into the market, none has equalled the growth of MLS. Between 2008 and 2014, the company grew 48%, far ahead of their closest competitors. This growth is generally credited with their strategy of driving down costs, therefore making themselves a leader in mass manufacturing. They are the largest LED supplier by revenue in China.
Industry analysts believe that this may, in fact, prove problematic in the future, as rising internal costs will make it increasingly difficult to maintain their price leadership position.
San'an - Another fast-growing company, its equivalent 2-inch wafer capacity market share has gone from 2% in 2010 to 14% in 2015. They have been a beneficiary of government support in the development of their components, however that support is now reaping rewards in the area of finished LED products.
Nichia - The largest packaged LED supplier in China, Nichia is actually a Taiwan-based corporation. They were initially founded as a chemical company in 1956, but have since become a source of lighting innovation, including the very first LED white light, launched in 1996.
In 2016, they announced a partnership with Canadian-based Future Lighting Solutions in order to improve distribution and share development resources.
SUMMARY
Although traditionally dominated by a few high-profile brands, the lighting industry is seeing its profits and market share eroded through the growth of lower-priced Chinese suppliers. Even LED technology, which is projected to be the major source of future growth, is already experiencing this pressure. With falling costs, it is becoming easier for new companies to enter the market, which will increase fragmentation in the coming years.
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