More signs of a horticultural lighting resurgence emerged late last week, as the CEOs of Signify and ams Osram both issued upbeat accounts of the sector, which they said will help strengthen overall corporate results in the second half of this year.
For a quick review: The horticultural lighting business had wilted for many vendors starting around mid-2022, with companies like Signify citing the high price of electricity as the culprit. Although LEDs are well known for energy efficiency compared to conventional lighting, growers balked at paying for any new artificial lighting at all, with power prices surging. Rising interest rates also did not help, nor did the capital cost of the lights. By last summer, Signify CEO Eric Rondolat said 2023 would be a “missed season” for the horticulture business.
But electricity prices have been declining, more so in some parts of the world than in others. The Paris-based International Energy Agency noted in its recent Electricity 2024 report that “wholesale electricity prices in many countries fell in 2023 from the record highs observed in 2022.”
With that, the business has been coming to back to life, as both system vendor Signify and chip provider ams Osram first started to observe in their year-end 2023 reports three months ago.
They did not deviate from that assessment last week on their first-quarter 2024 financial results calls with analysts.
Signify’s Rondolat explained that the first quarter is typically the order period for growers, and that the company registers the sales by the third quarter. Whereas last year’s order period was dismal, this year has been a different matter.
“Our order intake has been really growing substantially,” Rondolat said. “We see the recuperation of what we lost last year and what we lost substantially because of the price of energy...Basically, the horticulture market works in such a way that you have the commitments in Q1 and you deliver a big part of it in Q3. We see that happening, so Q3 will be a big quarter for us in the horticulture business and it will also participate in the overall growth of the company.”
Like Rondolat, ams Osram CEO Aldo Kamper was confident in his outlook for the horticultural sector, to which the company provides LED chips such as a red emitter it calls Hyper Red.
While the company’s difficulties in another product category — micro LEDs — dominated the results report, Kamper pointed out that core LED businesses in automotive and in horticulture are faring well.
“We continue to win new business on an ongoing basis owing to the competitive edge of our existing and new products,” he said of several products, including horticultural.
“Our latest hyper red LED product for the horticulture market boasting the highest efficacy on the market is finding very strong traction,” he said, noting that prospects include “an exceptionally large project worth €75 million, amongst many other design wins and key customers.”
“This gives us confidence that the second half of ’24 is indeed seeing stronger traction in industrial, especially for the horticulture side of things,” Kamper added.
If electricity prices are the key to the market revival, the industry is not entirely out of the woods, given the constant volatility of the geopolitics and energy supply chains.
And as the IEA noted, prices vary across territories.
“There are, however, regional differences,” the IEA pointed out. “Wholesale electricity prices in Europe declined on average by more than 50% in 2023 from record levels in 2022. Despite this, prices in Europe were still roughly double 2019 levels, whereas U.S. prices in 2023 were only about 15% higher than in 2019.
“Uncertainty about both the pace of France’s nuclear recovery and natural gas prices are supporting higher futures prices in Europe for upcoming winters. The hydropower-dominated Nordics remain the only market in Europe with average wholesale electricity prices comparable to those in the United States and Australia. Wholesale prices in Japan and India also remained above 2019 levels in 2023.”
MARK HALPER is a contributing editor for LEDs Magazine, and an energy, technology, and business journalist ([email protected]).
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