As energy efficiency becomes a concern for more homeowners, customers are turning to LEDs as an alternative to normal light bulbs. The global market for LED lighting is already in the billions per year, and a new report shows that the industry is on the verge of explosive growth.

Market research firm IHS today revealed its prediction that the global LED industry will hit an estimated $7.1 billion by the year 2016. That nearly double the $3.6 billion in revenue the industry is expected to take in this year.

The future growth in the LED industry, according to IHS, will come from packaged lighting. In particular, residential customers will be the large growth segment. Competition in the space is expected to heat up, with the firm estimating a drop in LED light bulbs to just $0.25 in 2016.

This is different from previous years, when LED lighting industry growth had come mainly from component sales for backlit technologies such as TVs, smartphones, and PCs. Industry growth in those years was slow, but steady. Now, with new display technologies coming to smartphones and tablets, LED manufacturers are looking for a new growth outlet.

“As retail prices for LED lamps have fallen, it’s become more obvious that they are an attractive alternative to conventional light bulbs, providing long-term savings in energy and replacement costs,” said Stewart Shinkwin, market analyst for lighting and LEDs at IHS. “Because of this, shipments of LED lamps for lighting are set to increase dramatically in the coming years, rising to 2.4 billion units in 2016, up from 520 million in 2013. The rapid expansion of the lighting market will come as a major boon to suppliers of packaged LEDs, which are seeking the next growth opportunity following the slowdown of the backlighting business.”

(Image courtesy Philips)