One of the best bets for future innovations in the automotive lighting market segment, LED technology has already spread through interior lighting and exterior back lighting applications. The next big challenge will probably focus on exterior front lighting, mostly headlamp systems.

"We expect LED technology’s penetration rate in this sector to continue growing in the coming years," said Pierric Boulay, technology & market analyst at Yole Développement. "As cost decreases, OEMs expertise Tier 1s will increase and novel functionalities will emerge, especially for advanced front lighting systems."

In parallel, other technologies such as laser and OLED are being developed, still considered as complimentary approaches, according to Yole.

Yole automotivelighting marketshare Figure 1: Other technologies are considered as complimentary approaches. (Source: Yole)

The automotive lighting industry is today controlled by five main players, said Yole’s analysts. In 2015, the top 5 industry players—Japan's Koito and Stanley, Italy's Magneti Marelli, France's Valeo and Denmark's Hella—held ~80% of total automotive lighting revenue. The remaining revenue was distributed across a very fragmented industry with more than 20 players.

Yole automotivelighting topplayers Figure 2: Top 5 industry players (Source: Yole)

But this situation could change in the future due to the rapid evolution of the automotive lighting market. Indeed some emerging players, including China's Xingyu, Italy's Olsa, Chin's Ta Yih and Spain's Grupo Antolin, have already exhibited a very high growth rate.

"More than 10% between 2014 and 2015, compared to the total market’s average 5.4% growth," said Boulay. To effectively differentiate from market leaders and gain additional market share, these players mainly focus on innovative systems and/or lower-cost solutions and/or emerging markets like China.

"Also, it is important to understand that the introduction of new technologies/functionalities will push OEMs to be closer to device/component developers (i.e. Tier-2s and Tier-3s) and new suppliers. As a result, they will probably bypass more and more Tier-1s for development and production in the future, and therefore create a new supply chain," he added.

At the LED module level, the story is different. The attractiveness of this part of the LED supply chain has been full demonstrated, and according to Yole, "Today, value is mainly located at module level."