Uncertainty looms over SSL sector, but pricing stabilizes (MAGAZINE)

Jan. 1, 2019
Fortunately, I’m not a fortune teller. My crystal ball has never been that accurate from a business perspective. I’ve had my moments projecting technology wins.

Fortunately, I’m not a fortune teller. My crystal ball has never been that accurate from a business perspective. I’ve had my moments projecting technology wins. I was first in the tech industry to write that Wi-Fi would be ubiquitous. Then again, I projected the demise of USB in favor of more capable Firewire. But I digress. This is about LEDs and the solid-state lighting (SSL) sector. And headed into 2019, my crystal ball is hazy indeed.

Let’s start with the good news headed into the New Year. Price levels are generally stable at both the LED component and SSL sectors. A recent Q&A article with Philip Smallwood, director of research at Strategies Unlimited, and Martin Shih, an analyst working on Smallwood’s team, made the point repeatedly relative to packaged LEDs (http://bit.ly/2Fizr6d). We will get much more data from a Strategies in Light Plenary Session presentation on Friday, March 1, in Las Vegas when Smallwood delivers the latest data on LEDs, lamps, and luminaires (https://www.strategiesinlight.com).

In part the stabilization is due to the fact that we are finally seeing cracks in the China economy. Of course, we should know from history that economies can’t sustain growth indefinitely. And it’s good news that the Chinese government has slowed its cash infusion into LEDs and SSL. A free market could provide a much more level playing field. Indeed, the LED and SSL sectors need some time to recover from periods of price erosion that went far beyond what the maturation of technology would warrant.

Of course, the economies in the US and Europe are showing signs of strain as well. Brexit isn’t helping in Europe. And as I write this, the US government is mired in a politically-motivated shutdown crisis and was frankly showing signs of instability long before the manufactured crisis emerged. Indeed, the stock market has acted as if the long Bull market run was nearing or had reached the end.

It’s no wonder that the LED and SSL companies across our industry have been paralyzed to an extent by all of the uncertainty. The companies have certainly continued R&D activity. But to a large degree, marketing and promotional activities have been curtailed. And the on-again, off-again US tariff situation has only exacerbated the problem.

You could step back, and based on the state of the economies and governments, project bleak news for 2019. But I’m
hoping that the small area of clarity I see in my crystal ball expands. There is still a reason for optimism.

Regardless of what happens in the governments or economies, a move to SSL will remain a good one. Businesses small and large that have not transitioned to LED lighting — and that remains most of them for now — will benefit from such a transition. There are few such investments that will provide an assured return on investment (ROI).

Now business managers and owners may need a bit of patience and a long view to lifecycle costs. An SSL retrofit might pay back in two years with incentives, or maybe five without. Add controls and achieving ROI simply based on additive energy savings will stretch the payback window longer. Then again, new applications such as indoor wayfinding or space optimization or security might accelerate payback.

There’s a famous phrase from an athletic shoe company that I never much liked. But our industry needs to find a way to convince customers to just do it.

Maury Wright,
[email protected]