Industrial focus boosts lineup at GE Lighting

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Industrial focus boosts lineup at GE Lighting
LED manufacturer sought market entry as demand emerged

By Chuck Soder, Crain’s Cleveland Business

GE Lighting wants to start lighting up factories and warehouses with LEDs.

GE Lighting CEO Maryrose Sylvester.
Photo Credit: McKinley Wiley

The company’s fast-growing LED business dove into the industrial market on Nov. 26, when GE Lighting agreed to buy Albeo Technologies Inc. of Boulder, Colo., for an undisclosed price.

The deal immediately will fill a gap in the product lineup and customer base of GE Lighting, which is based at Nela Park in East Cleveland. The General Electric Co. unit previously did not own an LED product designed to provide general lighting for high-bay industrial buildings. Albeo specializes in the segment, marketing itself as a provider of “industrial strength LED lighting.”

Albeo will help GE Lighting capitalize on the industrial market’s growing demand for products that use light-emitting diodes, which are more efficient — though more expensive — than most other lighting products.

The GE unit started looking for a producer of industrial LED lighting to buy after noticing that demand among industrial customers was “emerging faster than we thought it would,” said Maryrose Sylvester, CEO of GE Lighting.

Factories and warehouses are looking for ways to cut their energy bills, which tend to be a big part of their operating costs, Ms. Sylvester said last week during a news conference in Boulder.

Plus, they tend to be large customers that buy more products, Ms. Sylvester said.

“This acquisition was all about growth … and getting to big customers faster,” she said.

Revenue from GE Lighting’s LED business already is growing about 50% to 70% annually, Ms. Sylvester said. Today it accounts for about 25% of GE Lighting’s sales, up from 15% a year ago, she said. That figure should jump to 35% next year, she added. The unit does not release its sales figures.

A switch at the switch
Today, most of GE Lighting’s LED sales come from products used to light streets, parking lots and retail stores. Although the company offers LED bulbs to replace the incandescent bulbs most people use in their homes, they have yet to be widely adopted because of what Ms. Sylvester described as “a price point challenge.” Even though the LED bulbs use less electricity and are expected to come down in price, they remain many times more expensive than incandescents.

The popularity of commercial and industrial LED lighting products has slowed sales growth related to GE Lighting’s fluorescent and high-intensity discharge lighting products, Ms. Sylvester said. Sales of those products soon should start to shrink as LEDs replace them, she noted.

“The market’s moving very quickly,” she said.

Between 60% and 70% of GE Lighting’s product development budget goes toward LED products, up from about 20% four years ago, said Steve Briggs, general manager of global product management for GE Lighting. The overall size of the budget has grown, too. The company has added about 200 people to its global engineering team since 2009, through internal growth and acquisition, according to a company spokesman. Of the 700 people who work at Nela Park, about 100 are engineers.

“We’ve practically doubled the size of our engineering team,” Mr. Briggs said.

World of growth
Demand for LEDs is on the rise, especially among industrial customers, said Vrinda Bhandarkar, director of research related to LEDs at Strategies Unlimited, a marketing research and consulting firm in Mountain View, Calif.

Worldwide sales of LED lighting products are expected to hit $12.3 billion for 2012, up 26% from $9.8 billion in 2011, according to Ms. Bhandarkar’s research. By her figures, the 2012 sales total would more than double the $5.5 billion sold in 2010.

In the industrial market, sales of LED lighting products grew by 17% worldwide in 2012 versus 2011, but the market climbed by 70% in North America, she said. Demand has been driven partly by incentives that utilities in some regions are giving to encourage companies to use less energy, Ms. Bhandarkar said.

“It’s really taking off,” she said.

Ms. Bhandarkar added that GE Lighting found a solid company in Albeo, which has 65 employees and also makes LED fixtures for non- industrial businesses.

“They have been really good at producing quality products,” she said.