Indoor/vertical farms set to boom, LEDs leading the transition, says Yole

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The 2016 horticultural lighting market (i.e. system level) represented a business of about US$3.1 billion, representing approximately US$3.8 billion in 2017. But according to a recent report from market research firm Yole Développement, this market is set to grow rapidly at a 17.8% CAGR between 2016 and 2022, possibly reaching more than US$17 billion by 2027.

While Yole sees the current business mostly driven by greenhouse applications and incumbent technologies (92% and 79% in revenue, respectively) during 2017, the transition to LED technology and the emergence of new applications will expand the market’s size.

In its report “Horticultural LED Lighting: Market, Industry and Technology Trends” Yoles sees this market reaching nearly US$8.6 billion in 2022, than US$17 billion in 2027”, comments Pierrick Boulay, Technology & Market Analyst at Yole.
At the LED device level, market opportunity represents almost US$100 million in 2017 and should grow to about US$400 million in 2022, eventually reaching US$ 700 million in ten years’ time.

Horticultural lighting market revenue ($B),
2017 vs. 2022 vs. 2017.
Source, Horticultural LED Lighting:
Market, Industry and Technology Trends,
Yole Développement. 

The LED lighting industry sees horticultural lighting as a new opportunity for which to develop high added-value products with greater margin levels. In Q4/2017, Yole identified less than 50 players as offering dedicated LED-based systems. The industry is highly concentrated in North America with a 50% market share (number of companies involved), the result of medicinal cannabis’s legalization.

“Looking ahead, industry evolution will strongly depend on market dynamics.” explains Joel Thomé, PISEO’s CEO. “Indeed, industrial players’ marketing and communications are currently focused on two main applications including medicinal plants (mostly cannabis) production, which is today the main market driver and vegetable production, which is developing with a “low-end / high-volume products” focus.”

Part of the established lighting system industry may never proceed with the medicinal plants application, in order to preserve brand reputation. Such a situation is likely to benefit new entrants that will generate revenue swiftly and rapidly increase their horticultural lighting market expertise.

Horticultural lighting applications.
Source, Horticultural LED Lighting:
Market, Industry and Technology Trends,
Yole Développement.

At the device level, most LED manufacturers embrace a “technology push strategy”, taking advantage of their traditional LED portfolio (i.e. UV, visible, and NIR LEDs) to quickly offer some horticultural lighting solutions and related marketing tools, such as dedicated datasheets.

In the future, with a better understanding of LED light’s effect on plant growth, these players might start offering more dedicated solutions (i.e. fine-tuned wavelength package, multiple wavelength package, etc.).

The missing block in the supply chain is mostly at the module level, with no real supplier in 2017 – reason being that the market is still emerging and the industry is still young, with no standards and regulations. In this context, each lighting system manufacturer design its own module with a specific wavelength mix/recipe.
Some companies are finally starting to position themselves as solution providers, offering not only lighting systems but global solutions integrating sensors (humidity, oxygen, etc.) and data management software. The objective of these smart lighting systems is to further increase the productivity of greenhouses and urban farms.

Yole Développement – www.yole.fr

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