LED Industry: is this the hockey stick?

The LED industry has entered a new phase of accelerated growth. After riding the cell phone keypads and LCD screen backlight wave during the previous decade, the industry is on for a spectacular growth thanks to large LCD backlight applications. While similar in essence to the smaller LCD screens, the larger displays found in laptops and large flat panel TVs were until recently more difficult to illuminate with LEDs because of their large surface. One must give credit to Sony and Lumileds, now a subsidiary of Philips, for pioneering the field in 2005. However, while delivering outstanding performances, the price of those LED backlit TVs were out of reach (>$10,000) for most consumers. A strong push by Apple, Dell and other brands allowed LEDs to start being adopted in laptops in 2007. In 2010, the adoption of LED for the segment should exceed 80%. But until 6-8 months ago, the industry consensus was that broad adoption of LEDs for large displays (20” and above) was still at least a couple years away. Samsung shook the industry in the second half of 2009 by bringing into the market a flurry of breakthrough products at affordable prices. Thanks to various engineering breakthrough and a strong marketing push (LED TVs anyone??), the unexpected success of the product put large LCD TV 2 years ahead of the initial roadmap and rescued the LED industry from what was going to be its first year ever of negative growth in 2009 (2001 was a flat year).

Since then, All TV manufacturers have jumped into the bandwagons, and LG, Sony, Sharp, Vizio, Toshiba all lined up an impressive series of new LED backlit LCD TV for 2010 with aggressive pricing. The cost of LED backlit TV remains marginally higher than “old fashion” cold cathode fluorescence lamp (CCFL) TV. However the price gap is shrinking and the consumers are falling for those ultra-slim TV with high contrast ratio and in some cases, improved color gamut and reduced motion blur. However, because of the engineering tradeoffs necessary to keep cost under controls however, not all the potential benefits of LED backlit TVs are offered on every set.  But, as technology improves, LED cost decrease and economy of scale become significant, the adoption rate of LEDs in LCD TV is expected to jump from 2-3% in 2009 to more than 20% in 2010 with the most optimistic forecasting 39 millions LED TV sets for the year. The adoption rate should further increase to 70% by 2013 and volumes exceed 150 millions. The exact impact on the LED industry is difficult to quantify though: because of the mix of panel size and the variety of design options (edge lit vs. backlit, white LEDs vs. RGB), estimating the exact number of LED chip per TV set is challenging (it varies from 250 to more than 1,000 on certain models). The one sure thing however, is that LCD TV will carry the LED industry through what analysts call it second growth cycle, possibly slightly restrained by tensions on the Sapphire substrate market and the ability of equipment manufacturers to deliver the record amount of MOCVD reactors to be shipped in 2010 and of the chip manufacturer to install and qualify them on time (it takes3 months to start production on a new reactors and in some cases another 4-6 months is needed get the chips from the new reactor validated by the final customer)

So what about the next big thing for LED: General Illumination? The main barriers to a broad and immediate adoption are still here. Those are essentially:

-          Energy efficiency.

-          Reliability.

-          Color consistency and stability.

-          Lack of standardization.

-          Confusing supply chain.

-          Upfront cost.

Discussing those in details is not the purpose of this article but there’s a consensus that most of those barriers should be removed in the next 2-3 years. Impressive energy efficiency progress are announced on a regular basis by LED manufacturers and reliability is improving as engineers become aware of the challenges posed by the design of a flawlessly integrated LED luminaire (GE recently identified more than 100 possible failure mode in LED light engines). Multiple standardization organization are working on defining and implementing testing and performance standards and communicating them to the public. Solid state lighting is progressing niche by niche.  More municipalities are testing LED streetlight and some have already committed to massive retrofits (200,000 street lights in Los Angeles). Adoption in commercial and retails lighting, while still low in volume is progressing fast (announcements from Wall Mart, Starbucks…). While we all have our eyes focused on residential applications, it’s important to realize that homes are the smallest segments (in term of lumens) compared to industrial, commercial and municipal lighting. However, for most, it remains the ultimate frontier.  But even this application now seems within reach and LED replacement bulbs might come to your home faster that you expected. Don’t rush yet though, as low quality products are still flooding the market and might create a negative initial perception of the technology, a risk that the industry is aware off and trying to control by working on performance standard (make sure you get products meeting or exceeding the Energy star criteria for solid state lighting). In Japan, the largest electronic manufacturers are making a strong push with quality products. Toshiba Lighting and Technology introduced a 60W equivalent replacement LED bulb for JPY9,000 in late 2008. The same product now goes for less than JPY4,000. Sharp launched similar offers and the price is now expected to reach  JPY2,000 in 2010. At this pace, most now expect the cost of LED replacement bulbs to reach the $10 for 1000 lumen target commonly accepted as the “magic” number that will trigger massive adoption by 2012. In the US, Philips released the first LED bulb to participate to LPrize contest organized by the US Department Of Energy to reward the first 60W replacement LED bulb to meet aggressive performance targets.  A lot of credible light bulb replacements could be seen at the recent Strategies In Light conference exhibition floor and CREE is planning to release a retail version of its award winning LR6. The price point at which it will be released will send a strong signal to the industry.