LEDs Are Set to Take Over Lighting

Recent favorable analyst comments on the LED (Light Emitting Diode) market and, specifically, market leader {complink 12830|Cree Inc.} have once again fired up interest in LEDs, which have the potential for long-term market-share gains in many conventional lighting markets. In fact, it seems that, if anything, LED growth has been underestimated.

LED lights differ from conventional lighting materials in that they are powered by chips, rather than filaments, as are incandescent lightbulbs, or gas in the case of fluorescent lights. They are significantly more energy efficient than traditional lights and can last as much as 10 times as long. Studies by the American Council for an Energy-Efficient Economy (ACEEE), for example, indicate that the LEDs used in traffic signals save as much as 93 percent in costs per signal.

LEDs have recently experienced steady market growth in two primary segments: the “backlight” market, where they are used to illuminate screens in TVs and personal electronics; and commercial and residential lighting. Other applications include municipal lighting.

LEDinside, an industry tracker, estimates the entire lighting market at US$73 billion, with LEDs having only about 3 percent penetration, or $2.4 billion.

To put things in industry perspective, take a look at Cree, considered a market leader with the largest market share in LED components and a strong patent position. Cree, despite showing the largest gains in the market, still had revenues of only about $867 million in the fiscal year ended June 27 and $7.4 billion in market capitalization as of Friday, Dec. 3.

Cree has been growing fast. It reported record revenue in fiscal 2010, up 53 percent from $567 million in the prior year, while non-GAAP earnings increased 203 percent to $179 million, or $1.71 per diluted share. Cree CEO Chuck Swoboda said at the end of that fiscal year that “we are in the early stages of broad adoption to LED lighting over the next 10 to 15 years.” Other leading global manufacturers of LED components include Osram GmbH, {complink 4269|Koninklijke Philips Electronics N.V.}, and Nichia Corp.

The LED market might progress something like the computer market: First, it started as an expensive and eccentric technology only used for the largest commercial and industrial applications. Then, Moore’s Law drove the cost of the technology down, and it made its way into the consumer technology market. This appears to be what's happening to LED lighting as the cost curve has Moore's Law properties and can be scaled on a manufacturing basis because they are, in fact, chips.

And this is what generates real excitement in the LED industry: the notion that the entire lighting market will be taken over by the technology. In Japan, further penetration of LEDs into the consumer market has already happened (why do the Japanese always seem to be on the leading edge?). According to Asian investment and research firm GFK, LED lightbulbs now account for more than 50 percent of the entire lighting market in Japan. Yet, worldwide, LEDs are only a small portion of the global lighting market. Digitimes research estimates that the share of the global lightbulb market could reach 17 percent by 2013. From 2011 to 2013, global LED production value will rise by at least 25 percent every year and surpass $20 billion, according to Digitimes.

Combine LEDinside's numbers with Digitimes numbers, and it's clear the LED lighting market could easily grow from $3 billion to $20 billion in less than 10 years.

Commercial and municipal activity is currently driving the LED market. New York City mayor Mike Bloomberg famously replaced all of New York City's traffic lights with LED-based technology a number of years ago. New York City also announced in 2008 that it is exploring the move to LED streetlamps. And Walmart has made aggressive moves to replace conventional lights with LEDs in many of its buildings.

The criticism of LEDs has been similar to that of nearly every other cutting-edge technology: They are too expensive. And history has shown such criticisms to always be short-lived, as the price of the new technology always drops rapidly enough to drive broader adoption.

Take a look at the flashlight at your local hardware store. Chances are it's an LED-based flashlight. Just five years ago this would have been considered eccentric or expensive, but now it's mass market. This simple little flashlight demonstrates the power of the technology. Do you really think cost is going to stop LEDs from taking over all lighting?

14 comments on “LEDs Are Set to Take Over Lighting

  1. Barbara Jorgensen
    December 3, 2010

    There's no question that LED is the better technology and as such, will take over lighting. The more LED is adopted, the more quickly costs will come down. Right now, governments, municipalities and even corporations hesitate becuase of the high upfront cost of transitioning to LEDs. Maybe if the generally positive trends we've seen in the past week continue (manufacturing up; chip cos bullish) continue, purse strings will loosen up and we'll see lighting upgrades.

    From a consumer standpoint, LEDs are awesome as Christmas lights. I'm doing my personal part to advance the technology. 🙂

  2. kumar1863
    December 3, 2010

    Thanks for the post Scott. LED will lead all technologies as they are very efficient and due to their long life. As Barbara said people are hesitant to take transition from their used technology to LED. But sooner LED will take over all the areas.

  3. AnalyzeThis
    December 3, 2010

    I have to say that I'm absolutely SHOCKED that LED market penetration is only 3%. That seems absurdly, ABSURDLY small given the obvious advantages they offer. Plus, I just assumed that given the number of commercial applications that I've seen them utilized in that they were a much bigger chunk of the market. But I suppose I'm just being ethnocentric.

    I absolutely agree that the future for LED lighting looks… sigh… bright. As Swoboda says, within the next decade or two this should really take off and go mainstream.

    I'm surprised that people are still claiming that LED is still too expensive. First of all, like you mention, the costs have already dropped an absurd amount in recent years. Secondly, even if you need to spend money to implement LED (like NYC did with the traffic lights), you absolutely will save yourself money and hassle long-term in most scenarios.

    All this being said, I am sure the “traditional” players in lighting must be scared out of their wits. LED really does have the potential to essentially take over the market… it almost seems inevitable at this point.

  4. Parser
    December 3, 2010

    Law in most countries and continents is phasing out incandescent light bulbs. U.S.A. will start that process in 2012, but Australia and European Union started it in 2009. This will give the LED industry boost. Maybe we should invest in LED factories before some comes up with even better light source. 

  5. t.alex
    December 4, 2010

    I wonder if LEDs can creep and dominate in other fields such as automotive or industrial applications?

  6. Mydesign
    December 6, 2010

        Scott, you are very much right. There are lots of researches happening in the same area.  Sometimes back, the application of LED in electronic appliance is very less and used only to indicate either the power is ON or OFF mode.  After that, some of the electronic and electrical appliance manufacturing companies stated research more about the characteristics of LED Bulb. As a result of the innovation, they had found some good advantages for Led when compare with CFL or other bulbs
    a.   LED bulbs are more energy efficient.
    b.   Life spans of Led bulbs are 10-25 times longer.
    c.   Energy wastage (Heat) is very less.

        For lighting purpose, the LED bulbs are associated with a small circuit having chips and hence little bit costlier, when compare with CFL or other bulbs. I hope this pricing will come down to an extent, when massive production happens.

        Now the technology had grown much and some of the companies are offering LED TV and projector too. When we are looking for green and energy saving mechanism, Led can contribute a lot and hope the technology can drive for that.

  7. DBertke
    December 6, 2010

    Even though LEDs are technically superior to other lighting in a large number of uses, My wife is an Artist and her first comments were about how blue shifted and cold the LED lighting was and how she could not live with the color change.  As a long time photographer, I also understand the need for true color.  So if LED's are going to penetrate the market and replace current lighting, the manufacurers must set them up to reproduce a true color spectrum.  There are just too many visual reasons why people will want the warm soft white light they grew up with.  Plus the green cast from Flouresent bulbs have made artists and photographers very unhappy in the past.  To succeed, LEDs must be visually better, not just brighter, more energy efficient and long lasting.

  8. Scott Raynovich
    December 6, 2010

    Thanks Toms,

    Any idea how big this market can get? Where do you get your market research…


  9. Tim Votapka
    December 6, 2010

    Good comments on LED technology. Longevity is an advantage to be sure provided the product the diode is used in performs beyond specifications too. For example, my 13 year old neighbor has fried a dozen cell phones and two Ipods in just 3 years. My old Coleco Electronic Quarterback football game (purchased circa 1977) is still going strong as if it were shipped just the other day with every LED on the board glowing just fine and I'm not giving it up!

  10. Hardcore
    December 6, 2010


    My wife is an Artist and her first comments were about how blue shifted and cold the

    LED lighting was and how she could not live with the color change.”


    It is an issue that  is inherent in the led design and manufacturing process,  specifically the doping of the semiconductor and the overlay of the organic dye layer.

    LED's by their very nature, generally produce a tight band around a particular colour  frequency, and as such it is  currently not possible to get a 'warm' colored LED, the ones that are 'warm' have 3 chips mixed  to produce  the RGB.

    However since the 'chips' are not identical and the technology for the dies differs, they  tend to look a bit odd in the colour output, you 'feel' something is not right with the light output because they rely on fooling the receptors in your eyes to colour mix.

    Potentially the solution for 'warm' led's would require a single die, with some sort of  dye layer capable of  absorbing and re-emitting the light at a difference frequencies, so that the whole visible light spectrum is covered, but then planck's law dictates this behavior and the amount of energy required into the single die may be too excessive.(even if they could crack generation of such a dye)

    This is why everybody seems to be trying to  research multi die colour mixing and control IC's to manage this complex behavior, so to a greater extent it is technology that is currently limiting the uptake of LED lighting.

    We will crack it eventually or even come up with a solution in a totally new direction.

  11. Mydesign
    December 7, 2010

    Thanks Scott,
        The markets for LED products are very vast. Since not much similar products in market, we can expect a mass growth rate also. For a last couple of years many research and innovation has happened for the LED, both in product and application side. But due to recession and industrial slow down nothing came out in a fruitful way. Now the markets are coming up and the production line is also aligning with the requirement. Recently I had read an article that, electric and electronic giant Philips have a plan to invest a huge amount for LED innovation.  Few months back I had seen some emergency lamp and spotted lamping system from Philips with Led as main light source. By following this some of other companies like TI, Wipro, and Bajaj have also similar plans. LG, Sony and Samsung had gone a little bit ahead with Led TV and projectors. 

         Apart from the home lighting system, we can expect the application of LED lighting sources in other key areas like street lights, automobile lighting system, LED computer screen, Movie projectors, telescopic search lights etc.

         Scott, am not able to point out a particular data source because data’s are compiled from different article and magazines, which I had read earlier, with my own interpretations.

  12. t.alex
    December 7, 2010

    I personally would like to convert all the bulbs in my house to LEDs. But there is the instinct that probably i should wait a bit more until the price drops 🙂


  13. Scott Raynovich
    December 8, 2010

    Regarding the 3-5% market share, take a look around your house. Look at every lighting device in your home. Chances are you will see mostly incandecent, fluorescent, and halogen lighting. Does it look like more than 5% of your house lighting is LED?

  14. elctrnx_lyf
    December 8, 2010

    At this time I do not see 5% of the house hold using the LED lighting. But the LED”s are predominently used in the Backlighting for LCD displays and in the traffic signals for long time. But with the inbuilt advantages of lower power consumtion and higher life time LED”s will be seen in many more places in the future. One obvious big market for the LED wil be in the area of lighting appliances.

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