CFLs currently dominate the lighting industry in India, but their YOY growth has slowed down in the past three years due to the introduction of newer technologies
LEDs are the newest entrants in the lighting industry and will gradually phase out older and energy inefficient technologies, like CFLs
CFL manufacturers need to start implementing strategies to counter changing industry dynamics
January 2013: Despite being one of the oldest industries of the modern world, the lighting industry is fast evolving with more advanced technologies and products focused on energy efficiency and environmental friendliness. The lighting sector, one of the largest industries in India, stood at nearly INR 9,300cr in 2011. The compact florescent (CFL) technology has dominated the Indian industry for the past few years, but the latest technology of LED (light emitting diodes) is expected to change the market dynamics within the next 3-5 years.
The ValueNotes whitepaper, commissioned by BAG Electronics, titled The effect of LED growth on the CFL industry in India, discusses how new technology is impacting the lighting industry, particularly in India.
Until about 10 years ago, the lighting industry in India was dominated by fluorescent tube lights (FTLs) and incandescent bulbs (ICLs) as they were easily available, affordable by the masses, and easy to install and maintain. But with the advent of cutting-edge and more energy efficient solutions like CFLs, the balance has been gradually changing. CFLs, which are up to four times more energy efficient when it comes to lumens/watt output, find their application across all end-user segments. But the biggest reason for CFL dominance is its wide acceptance by the residential segment. Today almost 60% of Indian households use CFLs, whether urban, semi-urban or rural. The government of India has been a big contributor to the phenomenal rise of CFL technology in India as it plans to gradually phase out the older FTL & ICL technologies.
With the introduction of LED lamps, the lighting scenario in India has been going through a drastic change. Though the overall CFL industry in the country is growing, the growth rate has been decreasing over the last few years.
The growth of LEDs has been exponential in the past two years and it is expected to grow at a CAGR of ~45% for the next three years. The reasons for this growth are manifold. Increased penetration of LEDs led by government initiatives is one of the major drivers, especially in the public sector and industries. Environmental concerns over the safe disposal of CFLs and FTLs, and increasing awareness amongst end-users about the long term benefits of installing LEDs are helping the latter become more popular.
Manoj Joshi, Unit Head of India Operations at BAG Electronics said, “The shift from traditional lighting to LEDs will take place in phases, with CFLs replacing incandescent lamps, and eventually LEDs replacing CFLs.” In other words, with the help of government initiatives and increased customer awareness towards energy efficiency, LEDs will replace other lighting sources to a great extent in the longer run, much in the same way as CFLs have phased out ICLs in the last 10 years.
Expected impact of LED growth on the contribution of CFLs to the overall lighting industry
Samanvay Sharma, a team leader at ValueNotes and the author of the report, said, “Currently LEDs are the biggest threat to the CFL industry in India. As the cost of LED products falls, we will see more and more traction, especially with the government providing the biggest push.” He added, “CFL manufacturers need not worry about their sales for the next three years, but should implement strategies immediately, to counter the changing industry dynamics.”
Mr. B.S. Praveen, M.D., BAG Electronics India, said, “With the growth in LED sales, the immediate impact would be on the industry of high specification CFLs as the price difference is not very much.” Currently, the contribution of LEDs to the overall Indian lighting industry is quite limited; however, they are expected to contribute to about 14% to the overall industry by 2015, reducing the CFL contribution from the current 22% to around 20%. In the short run, CFLs will continue to gain market share created by the phasing out of ICLs; but in the long run they will face stiff competition from LEDs.
It is quite apparent that the shift towards LEDs in the long run is inevitable. But in the short run, CFL manufacturers need not worry. The CFL industry in India will grow for at least the next five to six years banking on the phasing out of ICLs and the unaffordability of LEDs. However, it is expected that the YOY growth rate for CFLs will go down with every passing year with the advent of more advanced and energy efficient technologies. It is highly recommended for CFL manufacturers to realign their strategies to match up to the changing industry dynamics, particularly with respect to LEDs.
To download a complimentary copy of the white paper, please follow this link