Smart Lighting Market Worth $27.7 Billion by 2026

The smart lighting market is projected to reach $27.7 billion by 2026 from $10.9 billion in 2021; it is expected to grow at a compound annual growth rate (CAGR) of 20.5 percent from 2021 to 2026. This is according to a new research report, "Smart Lighting Market with COVID-19 Impact Analysis,”  published by MarketsandMarkets.

Europe has the largest market share for smart lighting, the report notes. However, the Asia-Pacific (APAC) region has the highest growth rate and is expected to grow at the highest CAGR during the forecast period due to the rapidly changing face of technology and customer needs in high-potential markets such as China, Japan, South Korea and Australia.

The smart lighting market is exhibiting an upbeat outlook in the APAC region because of advancements in technology and the emergence of new business models as well as new construction in its developing cities. The booming commercial and industrial sectors would further fuel the adoption of smart lighting in APAC. Furthermore, growth in end-use sectors and mounting investment from government bodies also favor the growth of smart lighting in the region.

Smart city projects in developing economies

Various smart city projects are going on worldwide, presenting a huge opportunity for technology companies, technology service providers, utility providers, and consulting companies. The concept of smart cities is becoming synonymous with smart lighting. The main objective of smart city infrastructure is to use electricity more efficiently.

Smart cities are being seen as the driving factors for sustainable economic growth in a country; the growth of cities is strongly attributed to rapid urbanization. There is a growing trend of the transformation of cities into smart cities. Energy efficiency, sustainability of resources, and advancements in digital technologies have led to the rise of the smart cities concept.

The smart lighting application is expected to play a significant role in achieving sustainability and energy savings. The opportunities for lighting solutions in smart cities are huge.

Though smart lighting systems are energy-efficient lighting solutions that can save costs in the long run, the initial cost is high due to equipment,  integration, and installation services pricing. Smart lighting systems comprise various hardware components such as dimmers, switches, sensors, control systems, and software. Hence, the installation cost of smart lighting is higher than that of conventional lighting systems.

This is primarily due to the requirement for highly expensive software, control systems, and LED light sources for smart lighting solutions. This factor hampers the adoption of smart lighting control systems. However, factors such as the falling prices of LEDs and energy savings by installing energy-efficient lighting control systems are expected to minimize the impact of this restraint in the near future.

Smart office, smart retail trends

The increasing use of energy is resulting in rising levels of energy dissipation and carbon emissions. This is likely to increase the demand for energy-efficient lighting solutions, thereby driving the smart lighting system market growth.

Streetlights and lighting in commercial buildings consume substantial energy. Therefore, energy-efficient lighting solutions would play a pivotal role in commercial spaces such as offices, shopping malls, etc., where even an increment/decrement of 1 percent to 2 percent can lead to profit/loss of millions of dollars annually. Hence, smart lighting control solutions are deployed to decrease the expenditure on electricity bills.

Organizations are embracing digital disruptions to stay relevant and profitable and attract talent. Owners and operators of commercial facilities are becoming increasingly interested in smart lighting for energy management and enhanced performance. Smart lighting systems enable the installers to power, control, and manage the lighting system throughout a facility.

Enterprises are also increasingly inclined toward converging separate systems into a single, secure network infrastructure to enhance flexibility, efficiency, and performance; this increases the opportunities for the smart lighting market.

The growing trends of remote workplaces and smart retail are resulting in the deployment of smart lighting. The increasing adoption of smart and automated systems by commercial enterprises is thus expected to boost the smart lighting market.

Disruption due to COVID-19

The COVID-19 pandemic has had a heavy impact across industries and businesses. Since the outbreak began in China in 2020, major disruptions have created ripple effects in economies worldwide. The impact of COVID-19 on the smart lighting market will have a long-lasting effect.

Like much of the manufacturing sector, smart lighting manufacturers also depend on China for a significant percentage of the components used; the country is one of the major exporters of LED and lighting components. The lockdowns imposed across the world disrupted the production of LED and other components, resulting in a profound impact on the smart lighting industry supply chain.

Without the necessary components, production came to a complete stop in many regions such as North America and Europe. However, the situation improved in the second half of 2020 as supplier companies started operating with limited capacity.

Lights and luminaires segment

The market for lights and luminaires accounted for a larger share in 2020, the report says. Improved smart standards coupled with the growing demand for high input-powered devices for lighting are driving the market. OEMs are coming up with integrated solutions in luminaires, which require more input power.

Lights and luminaires broadly include smart bulbs, lamps, and luminaires such as fluorescent lights, light-emitting diodes (LEDs), and high-intensity discharge lamps (HIDs). The performance and characteristics of the light source used in lamps depend on the lighting task being performed. Choosing the right lamp type helps save energy to a great extent.

Smart LED luminaires are cost-effective and offer a high return on investment. They reduce installation costs and are safer since conduits and metal cladding are not required. The benefits provided by smart technology make LED lighting systems a very attractive option for property owners. LED lighting is one of the mainstream technologies offering competitive cost and energy efficiency benefits.

Indoor applications segment

The indoor segment accounted for the largest share of the smart lighting market in 2020, the report states. Growing affordability and higher efficiencies are driving the use of smart lighting in commercial, industrial, and residential buildings. The dominance is attributed to the growing consumer awareness about smart lighting and the adoption of energy-efficient products in the smart lighting market.

However, the high implementation cost of these solutions is one of the major factors inhibiting the growth of the market in the residential segment. APAC accounts for a large share of global construction investments, in which a significant portion is invested in the lighting industry, especially for the indoor segment. This factor is expected to drive the smart lighting market for indoor end-use application in APAC at the highest CAGR during the forecast period.

The smart lighting market in APAC

The smart lighting market in APAC is comprised of China, Japan, Australia, India, South Korea, Indonesia, Singapore, Taiwan, Malaysia, Thailand, Vietnam, Bangladesh and the Philippines. This region is s expected to be the fastest-growing market for smart lighting during the forecast period. The smart lighting market has enormous growth potential in this region, as connected lighting systems are rapidly being adopted in various applications, especially in smart offices/workspaces.

Increasing construction activities in Asia Pacific are contributing significantly to the growth of the smart lighting market in the region. There are several new opportunities for energy-efficient lighting and advanced lighting systems in the next few years as more than 200 million homes, and 18 million homes are expected to be constructed in China and India, respectively.

The increasing number of smart city and smart infrastructure projects undertaken by these governments will create several opportunities for energy-efficient lighting and advanced lighting systems in the next few years. In addition, government initiatives for offering low-cost LED lights at subsidized prices are expected to contribute majorly to the accelerated growth of the Asia-Pacific smart lighting market.