Light + Building 2018: LEDVANCE Will Continue to Scale up with a Clear Vision, CEO Says

“Our clear vision is to make LEDVANCE the World’s leading, innovative, full-scale LED lighting company.”

— Dr. Jacob Tarn, Ph.D., of LEDVANCE

Dr. Jacob Tarn, CEO of LEDVANCE (Image: LEDinside)

Two years ago, when we heard of LEDVANCE, it was in a position waiting to be sold from OSRAM. But now, as we take a close look at it again at Light + Building 2018, it is poised to expand its share in the global lighting market. In LED luminaires for example, a market predicted to constantly grow in volume to around EUR 40 billion by 2025 (Frost & Sullivan, 2015), LEDVANCE has already entered the Top 10 providers in Europe in less than two years. 

At Light and Building 2018, LEDinside had a face-to-face interview with Dr. Jacob Tarn, new CEO of LEDVANCE, who shared his insights on the market and the company’s strategic outlook.

Tarn: the LED lighting market is irrational, harsh and dynamic

Tarn used three words to describe the current situation in the lighting market: irrational, harsh, and dynamic.

When the market is manageable and develops at a steady pace, the dynamic in the market is rational and to a large degree predictable. However, that’s not what happened in the lighting market since the breakthrough of LED technology. Roughly since 2010, as the number of the companies able to produce and utilize LEDs grew and the manufacturing technologies matured, LEDs have become much cheaper. Prices of LED packages as well as LED lamps have therefore experienced a dramatic fall and the improvements in technology have made it plummet even more. Since then, the market has been full of surprises, hence irrational, Tarn said.

Those developments have led to lighting companies releasing higher value products in ever decreasing time intervals as product lifecycles have caught up with those of smartphones, around six to twelve months. The advancements in terms of value are not just limited to light or energy efficiency, but include capabilities like thermal resistance, beam control, or also color rendering. Another important value-add is the increased digitization on a product level, which makes LED bulbs or luminaires controllable via software in the context of smart homes and buildings. Manufacturers who fail to jump on the bandwagon of those advancements lose competitiveness. Currently, the established industry players have to cope with challenges from Chinese LED manufacturers with their huge newly-added capacities.

The rapid and ongoing disruption of the lighting industry through LED has been considered “one of the fastest technology shifts in human history“ (Goldman Sachs, 2016). Yet, the LEDVANCE CEO Tarn sees opportunities arising from this unforgiving competition. Instead of moving away from its general lighting focus like other big brands have done, LEDVANCE kept its focus and has implemented numerous transformation measures. Those include plans to consolidate its manufacturing footprint in Germany and the US.

By the end of 2018, the company aims to close the sites in Berlin and Augsburg, which mainly manufacture conventional light bulbs. In North America, a plant situated in Exeter, New Hampshire in the US and the other one in Drummondville, Québec, in Canada are to be closed no later than this December.

However, selected manufacturing sites in Europe and the US, for instance Eichstätt in Germany, shall be maintained to produce premium LED lighting products, such as high-end LED luminaires.

“Transformation is a necessary step to ensure a sustainable leadership in the market despite all headwinds,” Tarn emphasized.

The LEDVANCE office in Garching, near Munich (Image: LEDVANCE)

Five strategic pillars

To become the leading global lighting company, LEDVANCE will use both market pull and technology push methods, mainly in five areas, Tarn shared with LEDinside.

In terms of the aesthetics, LEDVANCE will be putting even more effort into its own signature design for lighting products in different applications. “We are a German company with distinct craftsmanship and design expertise. That is part of our company’s DNA and very important for a lighting provider. A product with exceptional design always differentiates itself from its competitors, especially from products made by Asian manufacturers” said Tarn. At Light + Building, LEDVANCE showcased its brand-new design language—Scale. With three-dimensional elements, which are reminiscent of parts of the LEDVANCE logo, the design has a sleek, minimalistic look and can be easily recognized.

Also, as another focus area, the company will keep improving the light and energy efficiency of its products. For example, LEDVANCE presented an LED tube, the SubstiTube Connected, which reaches one of the world’s leading efficiencies of 200 lm/W. LEDs nowadays reduce power consumption by over 85%, compared with incandescent bulbs, and about 40%, compared with fluorescent lights respectively, according to a research by Goldman Sachs. Since 2013, the light output of a LED package per unit of electricity has been increasing from 130 lm/W to 190 lm/W, and that of a lamp from 89 lm/W to 141 lm/W by the end of 2017. Both will continue to go up at a rate of over 15 lm/W throughout this year.

Another key pillar for LEDVANCE will be to continuously further product and light quality, since the company targets the premium segments of the general lighting market, Tarn explained. The company is, for instance, looking into extending warranty times for several products to up to ten 10 years. In terms of light quality, Tarn stated that there will be a relentless focus in LEDVANCE’s product development on human needs and make use of the positive biological effects, light can have, e.g. improving people’s wellbeing. In addition, the company will expand its smart lighting portfolio, enabling seamless integration with all leading smart home systems.

In this context – ensuring a superior product and light quality – LEDVANCE’s own Research & Development shall play a crucial role with dedicated R&D centers in China, Germany and the US, each with different focus areas. Tarn indicated that over the next months there is more detail to come on the R&D structure.

Tarn also mentioned the strategic importance of a coherent and centrally steered Supply Chain management, working closely with LEDVANCE’s existing and future ODM partners. He pointed out that this shall give the company an edge over competition in terms of cost. Hereby, the partnership with MLS and the use of MLS’ highly efficient LED components will be an important element.

The CEO didn’t seem to be intimidated by the massive new capacity Chinese firms have poured into the global manufacturing pool. Instead, Tarn proposed to collaborate with many of those firms and harness their strengths in component manufacturing and cost control. “We will combine strengths of the East and the West and will turn them into competitive advantages for LEDVANCE,” said Tarn.

Strategies to be Played Out in Europe

“Europe is one of the most important markets for LEDVANCE, in which we have always been very successful,” stated Tarn.

He revealed that the LED penetration in terms of sockets equipped with LED bulbs in Europe currently is only around 10%, which is well below the penetration rates in other developed countries such as the US and Japan. The majority of European consumers are still using conventional lighting, which Tarn regards as an opportunity to trigger higher LED lamps growth in this market.

When it comes to key customer groups, LEDVANCE will continue to keep strong ties with its electrical wholesale partners as well as retail distributors, the latter ones of which include DIY (Do it Yourself) and chain retailers. Through partnerships with them, LEDVANCE aims to expand its presence and market more LED luminaires to the European market but also in other regions around the globe.

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