More than 130 years after Thomas Edison sparked a new industry
with the incandescent light bulb, his invention is finally giving
way to newer innovations.
Light-emitting diodes -- a form of semiconductor chip that
generates light -- produce the crisp, energy-saving backlit
displays for TV sets, laptops and smartphones.
The technology has been gaining traction in those markets over
the past 15 years. But in other markets, the LED lights were more
clunky and costly than the established incandescent and
fluorescent competition. That barred the technology from the
bigger opportunity -- lighting homes, offices and large-scale
Design and cost breakthroughs, and rising desire for energy
efficiency, have begun dismantling those barriers.
A scrum of LED makers are competing for precedence. Among
those are Philips Lumileds,General Electric (
), the Cooper Lighting unit ofEaton (
),Acuity Brands (
) and Soraa in the U.S.
Germany's Osram Sylvania has a heavy hand in the market.
Several Asia-based players also figure into the mix. In South
Korea, Epistar and Everlight Electronics, Seoul Semiconductor,
Samsung and LG Innotek are involved, as well as Nichia, based in
Suppliers of chips used by those companies includeVeeco
),STM Microelectronics (
) and Japan-based Toyoda Gosei.
One pioneer at the head of the field is North
Carolina-basedCree (CREE), which has been developing LED
materials and devices for 26 years. Several breakthroughs by Cree
influenced the company in 2006 to pursue commercial lighting
markets, including outdoor municipal lighting and industrial and
office ceiling fixtures.
"People scoffed," said Mike Watson, vice president of product
strategy at Cree. "But we've always been an innovator and we
committed to making the shift."
The following year, a tanking economy sent Cree's earnings
down 58% on a 7% decline in revenue. Revenue growth quickly
recovered. Earnings struggled back above 2006 levels in 2010.
But the company stuck to its guns and expanded its research
efforts in order to crack the residential lighting markets. This
year, the company broke a critical barrier.
In March, the company introduced a 40-watt LED light bulb for
under $10. The new 60-watt bulbs were under $13. Research by
Canaccord Genuity shows that consumer acceptance for LED bulbs is
"very high" when priced under $10.
"The lower prices have opened the biggest market opportunity,"
said Canaccord analyst Jonathan Dorsheimer.
Home Depot (HD) began pushing the bulbs aggressively. The
prices dropped further when Cree received the U.S. Environmental
Agency's Energy Star seal of approval. That gave consumers a
Cree recently added a 75-watt LED bulb to the lineup for
$23.97. The company claims the bulbs last 25,000 hours --
effectively 25 times longer than incandescent bulbs -- and use
84% less energy.
Incandescent Meets Its Match
Watson said the market for light bulbs across the board
worldwide is a $1 trillion business. Consumer purchases are the
smaller piece, about 20% of the total. Commercial and industrial
"But it's the consumer that leads every market transition,"
Consumers also tend to preface changes in business behavior,
Watson said, "so we wanted to capture the hearts and minds of
Cree hasn't been alone.
The LED market got a bonus in 2007 when Congress passed the
Energy Independence & Security Act. Among its provisions were
a series of mandates for the gradual phase-out of incandescent
lighting. Europe is ahead of the U.S. in this regard as it began
to implement a ban of incandescent light bulbs in 2009. China is
also phasing out incandescent bulbs, as is Japan.
The push to phase out energy-wasting incandescent bulbs is
part of a global trend to lower energy consumption and carbon
dioxide emissions. It also opens the door for a massive upgrade
to LED lights.
Lighting accounts for approximately 19% of purchased
electricity worldwide. Energy-efficient fluorescent technology
has helped lessen that amount but, judging by consumer tastes,
fluorescent lighting is not as good as incandescent. With the
rise of LEDs, incandescent bulbs may have met their match. "The
LED industry is on the cusp of beginning a multiyear secular
growth scenario," Dorsheimer said.
Market Set To Double In Size
He estimates there were about 17 billion residential lighting
sockets globally in 2012, 7 billion commercial sockets, 1.2
billion industrial and 1.4 billion outdoors sockets. More than
half of those sockets will have upgraded to LED lighting by 2020,
possibly as many as 80%, he estimates.
"The basic everyday Edison bulb is going away and will
ultimately be replaced with LED," said David Petina, research
analyst at Freedonia Group. Compared with he other alternatives,
including halogen, LED bulbs have the best lighting for the price
when energy costs are included.
Freedonia estimates the U.S. market for LED bulbs, for indoor
and outdoor lighting, including LEDs in motor vehicles,
flashlights and decorative lighting, will more than double in the
next five years to $7.3 billion in 2017 from $3.3 billion in
And while general lighting is the biggest market segment, many
other markets are energized for the LED transition. Currently,
about 60% of LED consumption is by TVs, smartphones and displays.
That will shift as LED lighting enters more homes and offices.
Multicolor LED lights are used increasingly in aircraft and
automobiles, not to mention billboards, agriculture, ports,
harbors and mines.
"The LED market is poised for very fast growth," said
$250 Billion In Energy Savings?
The basic light-emitting diode produces light as electrons
pass through a semiconductor material. The initial discovery of
electroluminescence occurred in 1907. But it wasn't until the
1960s that the technology began making its forays into expensive
electronic devices such as laboratory and electronics test
equipment and lasers. Then came radios, telephones, calculators
and TVs. LED technology is sometimes referred to as solid-state
lighting, a category that also includes organic light emitting
diodes, or OLED.
Watson said it's about time LED got put in the spotlight.
"What other technology do you have at home that dates back to
1879?" he said, referring to incandescent bulbs. "LED costs are
coming down fast and consumers and businesses now recognize it's
worth the investment."
A Bank of America Merrill Lynch report published in April
detailed the LED market as a rapidly emerging opportunity.
"Spurred on by legislation, LEDs could represent 45% of the
global lighting market by 2015," the report said. "Residential
LEDs could represent 70% of the general light market by
More mind-boggling, the report estimated U.S. adoption of LEDs
could result in energy savings of $250 billion by 2030. The
report also estimated the global LED market in 2012 at $11.6
Dorsheimer at Canaccord Genuity thinks some of the best and
brightest opportunities for LED expansion have yet to be
discovered. For example, research has demonstrated that students
perform better when learning under high-quality artificial light.
Research is underway on the psychological and physiological
affects of illumination in health care, the workplace,
educational facilities and the home. This includes the effect of
color-tunable lighting that LEDs can accommodate.
Boeing installed LED lighting in its energy-efficient 787
Dreamliners with multiple color lighting themes that can be
changed for cruising time, meal time, lighting to simulate
sunrise and sunset and other changes in ambiance.
Experiments in LED lighting are also taking place in
industrial applications in areas, such as the drying of inks,
coatings and adhesives without solvent emissions. In agricultural
and horticultural applications, the ability of spectrally tuned
light may enable farmers to increase and improve the output of
produce and livestock.
The categories all simply mark beachheads where the technology
is taking hold, Dorsheimer says, pointing to multiple usage
models out there that have not been fully uncovered.
"The first wave is about replacement bulbs and energy
efficiency," said Dorsheimer, "but as we go through this analog
to digital transition in lighting there's a whole host of new
things to address."