North American Lighting Equipment Markets

Abstract

Low-cost Foreign Imports Compel Domestic Manufacturers to Reduce Costs

Low-cost lighting products manufactured overseas have proliferated into the North American market, as the majority of consumers, distributors, and retail centers increasingly demand inexpensive lighting equipment. This is compelling domestic manufacturers to reduce their production costs to ensure price satisfaction among the distribution chain members and customers. Manufacturers are being forced to move their production facilities to low-cost sites abroad or face bankruptcy since they are unable to continue with price-cutting measures beyond a certain point. The situation is worse for smaller lighting equipment manufacturers. Lacking the resources required to fight large competitors and withstand the market maturity, they are being edged out of the competitive landscape.

This Frost & Sullivan research examines the North American lighting equipment market and its two main product segments: lamp equipment and lighting fixtures. Lamp equipment is further divided into: incandescent lamps; fluorescent lamps (such as T12, T8, T5, and compact fluorescent); and high-intensity discharge (HID) lamps (such as metal halide, high-pressure sodium, low-pressure sodium, mercury vapor). The study discusses the prevailing market challenges while highlighting the potential growth opportunities for participants.

Annual Lamp Replacement Expands Revenue Sources for Manufacturers

The replacement market is one of the key avenues for realizing revenue for lighting equipment manufacturers. This is especially true in case of lamp equipment. Unlike the expensive lighting fixtures, replacement of lamps takes place regardless of the economic conditions, even though a robust economy can ensure more commercial usage and higher sales.

"More than the demand arising from new constructions, the replacement market is the primary and steady source of revenue for lamp equipment manufacturers," say the analysts. "In fact, the installed base of lamps is likely to increase every year and this ensures at least a marginal increase in demand," they add. The ongoing replacement of HID lighting units with compact fluorescent lamps (CFL) is also likely to aid market growth. Interestingly, even relatively new HID installations are getting replaced, leading to higher demand for CFL.

Lights On: Action

The growing preference for smarter building facilities equipped with lighting automation is likely to increase the demand for sophisticated lighting products. Niche applications such as security lighting promise growth opportunities for manufacturers in a fiercely competitive and mature market. Such novel applications hold untapped revenue potential and participants should target them to widen their customer base and sustain growth. Lamp equipment manufacturers are looking forward to tap the opportunities arising out of ASHRAE/IES 90.1-1999, the new energy code to be enforced by the U.S. Government. This new code restricts the permissible wattage per square foot in new and renovation construction for certain classes of building. Due to the stringent constraint imposed on energy consumption, automated lighting features may witness a surge in demand, and this, in turn, is likely to provide opportunities for manufacturers of lighting control devices.

Amid these emerging niche opportunities, pricing pressures from the distribution chain are proving to be a serious challenge for lighting equipment manufacturers. "Low prices are good up to a certain point. However, there exists a line of demarcation – that – when crossed, jeopardizes the entire distribution chain from raw materials to finished products," opine the analysts. "Deciding on the right price and sustaining an efficient distribution chain is the key to surviving and outperforming competition in this market," they conclude.