Digital lighting slowly claiming a spot in the Internet of Things

The digital lighting industry is in a quandary. Prices for LED lights are falling quickly, making the technology more compelling to customers, particularly owners of office buildings and warehouses. But the price decline has come at the expense of manufacturers who have over built production capacity and now need to idle some of their equipment.

This imbalance of supply and demand is also happening at a time when market researchers are expecting growth for the LED market to slow in the next several years. Our new report on the LED lighting sector on GigaOm Pro (subscription required) focuses on the latest LED technology, new applications, and the role that LEDs are playing in the increasingly digitized home.

While LED lighting isn’t widely used in homes yet, the technology isn’t new. LEDs are commonly used for indicator and traffic lights. But improving the technology so that it can radiate the same intensity, warmth and even distribution as incumbent incandescent and fluorescent lighting continue to be a challenge.

Bridgelux

Already, the making of the diodes themselves is cornered by rivals with large factories. Eleven companies control over 70 percent of the market for LEDs packaged to be turned into bulbs and fixtures. That makes it more difficult for startups to fight for market shares against the likes of Philips, Samsung, Cree and Osram Opto Semiconductors. Many of the large LED manufacturers also design and make their own LED bulbs and lighting systems.

Meanwhile, venture capitalists in recent years have shied away from investing in manufacturing technologies. Manufacturing technologies often take a lot longer to scale and more money than expected to reach the market. Even when they do, many forces — from strong competition to changes in public incentives that have driven clean tech’s growth — have gutted the ambitions of new entrants who thought their technology breakthroughs would naturally lead to high customer demand and profits.

What will be interesting to watch are new business models that go beyond just the sales of LEDs and their bulbs and fixtures. LEDs share a similar DNA as other semiconductor-based technologies, from sensors to wireless networking. Marrying lighting with these technologies can deliver uses in sectors from farming to location-based services. LED lighting, in effect, will serve multiple functions and occupy a spot in the widening web of Internet-dependent goods and services.