LED Technologies and Emerging Applications are Driving the Revolution

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The 2016 horticultural lighting market (i.e. system level) represented a business of about $3.1 billion, which should grow to approximately $3.8 billion in 2017. The current business is mostly driven by greenhouse applications and incumbent technologies, representing respectively 92% and 79% (in revenue) of the total market in 2017. However a transition to LED technology and the emergence of new applications will further increase this market’s size and attractiveness, both at system and LED device levels.

Yole Group of Companies expects the horticultural lighting market to reach nearly US$8.6 billion in 2022 with 17.8% CAGR between 2016 and 2022. “This is only a starting point”, comments Pierrick Boulay, Technology & Market Analyst at Yole. “Therefore, indoor/vertical farms are poised to boom from 2022 - 2027, propelling the total market to more than $17 billion in 2027.”

Moreover, at the LED device level, market opportunity represents almost $100 million in 2017 and should grow to about $400 million in 2022. The horticultural LED Lighting technology & market analysis from Yole Group of Companies is showing a $ 700 million market in 2027.

In a global lighting market that is becoming increasingly competitive, horticultural lighting is seen by the LED lighting industry as a new opportunity for which to develop high added-value products and reap greater margin levels. However, established LED players also face competition from new entrants, mostly start-ups and SMEs, desiring their own share of this growing opportunity.

As of Q4/2017, the LED horticultural lighting industry is still small, with less than 50 players identified as offering dedicated LED-based systems. The industry is highly concentrated in North America with a 50% market share (number of companies involved), the result of medicinal cannabis’s legalization.

“Looking ahead, industry evolution will strongly depend on market dynamics,” explains Joel Thomé, PISEO’s CEO. “Indeed, industrial players’ marketing and communications are currently focused on two main applications including medicinal plants (mostly cannabis) production, which is today the main market driver and vegetable production, which is developing with a “low-end / high-volume products” focus.”

Part of the established lighting system industry may never proceed with the medicinal plants application, in order to preserve brand reputation. Such a situation is likely to benefit new entrants that will generate revenue swiftly and rapidly increase their horticultural lighting market expertise.

At the device level, most LED manufacturers embrace a “technology push strategy”, taking advantage of their traditional LED portfolio (i.e. UV, visible, and NIR LEDs) to quickly offer some horticultural lighting solutions and related marketing tools, such as dedicated datasheets. In the future, with a better understanding of LED light’s effect on plant growth, these players might start offering more dedicated solutions (i.e. fine-tuned wavelength package, multiple wavelength package, etc.). The missing block in the supply chain is mostly at the module level, with no real supplier in 2017 – reason being that the market is still emerging and the industry is still young, with no standards and regulations. In this context, each lighting system manufacturer design its own module with a specific wavelength mix/recipe.

Some companies are finally starting to position themselves as solution providers, offering not only lighting systems but global solutions integrating sensors (humidity, oxygen, etc.) and data management software. The objective of these smart lighting systems is to further increase the productivity of greenhouses and urban farms.

Yole Group of Companies pursues its investigation towards the LED industry. Analysts are daily following the evolution of the industry to identify emerging applications and disruptive technologies. Yole Group of Companies is daily debating with leading companies to understand technical breakthroughs and market issues.