The LED industrial lighting market is estimated to be worth £50bn based on a 20 year retrofit cycle (this was verified by IHS a study commissioned by us in 2016). The market constitutes a wide variety of industries from heavy industrial to food and beverage.
Our lighting portfolio ensures that most of our fixtures have explosion proof and non-explosion proof variants, which allows us to service these diverse markets.
The market size is based on an assessment of the number of power plants, foundries, mines, petro-chemical plants, oil rigs, broadcast and telecoms towers, and other types of target locations. We have estimated the number of fixtures required per location and extrapolated the market value. Our assessment now is that the market potential is unchanged and the key to unlocking its potential lies in reducing the payback period, driving sales decisions at a corporate level and increasing market awareness of the benefits of LED.
Our customer base is conservative seeking low risk, proven solutions. Dialight's ten years of experience has earned a dominant position within this market.
1) Customer appetite for sustainable products
Sustainability is high on commercial and environmental agendas making our products more important to customers. Their appetite is not just based on being able to quote lower CO2 usage but the growing realisation that sustainable products can deliver savings in maintenance and energy costs. The corporate scenario can be set out as:
- the Sustainability Manager wants to lower CO2 usage;
- the Finance Director wants to lower costs;
- the Health and Safety Manager wants a safer working environment; and
- the Plant Manager wants controllable lighting to help achieve production targets.
Quite often competitor products will satisfy one criteria, but not all. Dialight fixtures "tick all the boxes". Our products;
- significantly reduce CO2 generation;
- cut power usage and maintenance costs;
- lower accident rick by ensuring all areas are well lit; and
- instantly provide better quality light to operational areas, the intensity of which can be varied according to requirements.
2) Regulatory and political change
In the US there is a movement to get high pressure sodium lights banned. The decision of the UK to leave the EU ("Brexit") results in uncertainties surrounding potential tariffs on goods exported to the EU
- in May 2017, we co-presented with Ford on the benefits of LED lighting to the Department of Energy in the US at the Better Buildings Summit in order to promote potential legislative change to ban old lighting technology; and
- we manufacture in Mexico which has a trade agreement with the EU. Such sales will be unaffected by Brexit, though Mexico to UK sales may be impacted by potential tariffs.
3) The LED advantage
LED lighting has many advantages over traditional lighting, so why is it not more widely adopted in the market?
- are instantly on compared to strike time delays of 15 to 20 minutes for other lights;
- provide better quality and white light compared to the yellow-tinged light of high pressure sodium;
- have a much longer life as they run cool i.e. do not create light via heat; and
- consume much less electricity than conventional lighting.
Our customers have seen the benefits of LED first hand. For potential customers, there is sometimes a natural inertia that delays making the decision change.
4) Climate Change
A global shift is underway to the low carbon economy. The Paris Agreement's aim is to strengthen the global response to the threat of climate change by keeping temperature rise this century to well below 2o Celsius above pre-industrial levels and to pursue efforts to limit the temperature increase even further to 1.5o Celsius. Additionally, the agreement aims to strengthen the ability of countries to deal with the impacts of climate change.
The Trump administration has issued written notification that the US intends to withdraw from the Paris Climate Agreement. However, in the notice to the United Nations the US state department said Washington would remain in the talks process. Even if the US pulls out of the Agreement, climate change is high on the agenda of many US states, who have indicated that they will introduce separate legislation to combat climate change.
To help both countries and customers reach these ambitious goals, we are developing new technologies that offer superior energy efficiency, reliability, longevity, improved light levels, visual clarity, and ultimately cost savings from reduced or eliminated lighting related maintenance and energy costs.
5) Macro Economic conditions
The global recovery will continue, but at a slightly slower growth rate of around 3.5%. Low core inflation should also tick up in advances economies as their labour markets continue to strengthen and the drag from low commodity and import prices unwinds.
We constantly strive to reduce the payback period on our fixtures which means we can target a maintenance budget rather than a capital expenditure budget. This is particularly important as it allows companies to maintain their capital budgets for other purposes.