LED Lamp Market - The “race to the bottom” has a silver lining

14 Sep 14:00 by


I’m not surprised by the recent UL warning on James Industry Inc.’s Hybrid (dual mode –Type A & Type B) T8 tubes that bear an unauthorized UL mark and do not meet UL standards for safety. This incident highlights a common phenomenon that occurs when high volume technology products are in the early stage of their adoption curve. Initially, the focus of the technology providers is on driving costs down to hit that magic inflection point where mass adoption can occur. During this period, the intensity of supply chain efficiencies, design optimization, economies of scale is severe. 

Unfortunately, sometimes this intensity manifests itself in companies’ cutting corners to drive the lowest possible cost. Cutting corners usually mean putting a lower quality, less reliable product in the market. In an extreme case, the product safety can be compromised to win the “race to the bottom” on cost. This is all disturbing but there is a silver lining inherent in the process. 

Along the way, the weaker companies that are unable to add real value fade away as market maturation evolves towards an inevitable consolidation of participants.  The other interesting thing that happens is the price reduction curve stops and reverses course. This is because the price reaches a “good enough” level for mass adoption and then the market dynamics shift. Innovative companies then look to add features and capabilities to the base product that bring added value to the customer. 

An example is the cell phone. When initially launched, they were over $2000 to purchase and upwards of $1000 per month to operate. Only top executives at the largest companies owned and used them daily. The fight to reduce cost was fierce and was initially won by Nokia who, at one time, had over 50% global market share. Nokia believed a phone was and always would be an inexpensive device that enabled mobile, verbal communication between parties. They offered it in multiple form factors and a variety of colors but never conceived it could do more functionally. We know where it ended, Nokia faded away, the $29.99 phone changed course and before you knew it we were all paying $800 for a touch screen mobile computer fundamental to our daily lives.  

It’s hard to imagine now, but the humble LED light bulb is traversing a similar path and it’s exciting to imagine what amazing value these ubiquitous commodities will soon deliver to the masses. So, while the lighting industry continues its race to the bottom, it’s up to a few shining stars to envision a new future