As solid-state lighting adoption moves from bulb socket replacement to lighting system engineering, luminaire manufacturers are beginning to actualize far greater cost savings through luminaire optimization rather than the simplistic process of component cost pareto management. Indeed, there are an increasing number of applications in which we see major shifts in the value chain in terms of increasing the L1 (LED) and L2 (LED array on PCB) value. The L1 value increase stems from a number of factors ranging from simply higher performing LEDs reducing the LED count, to L1 innovation such as high voltage LEDs, optimizing driver efficiency or to the use of high luminance LEDs enabling compact optics, allowing not only more design freedom but also cost reduction through space and weight savings. The L2 value increase is realized predominantly through increasing L2 performance with the use of algorithms that optimize L1 selection and placement and/or through L2 integration of drivers, control electronics, sensors, secondary lens and/or environmental protection, which is also initiating level collapse in the value chain. In this paper we will present the L1 and L2 innovations that are enabling this disruption as well as provide examples of fixture/luminaire level benefits.