Monthly Special Feature

LED Market Grew Almost 10% in 2011, with 44% Growth in Lighting - The worldwide high-brightness LED market grew from $11.3 billion in 2010 to $12.5 billion in 2011, a growth rate of 9.8%, according to market-research firm Strategies Unlimited. Demand for LED components (i.e. packaged LEDs) in the lighting market grew 44%, from $1.2 billion to $1.8 billion. However, looking ahead, the annual revenues for packaged LEDs are likely to stay approximately flat for the next five years. The growth in revenue from the lighting sector will be largely offset by a decline in the backlighting sector. The latest HB-LED market update was revealed during a pre-conference Investor Forum at the Strategies in Light event in Santa Clara. Analyst Ella Shum of Strategies Unlimited will go into more detail on HB-LED market developments in the keynote session of the conference on Wednesday February 8. http://www.ledsmagazine.com/news/9/2/6

Leading LED suppliers for 2011 - On the supply side, 10 companies accounted for more than 68% of the LED market in 2011. Strategies Unlimited arrived at these figures after analyzing market demand as well as the supply-side activity of 54 LED component suppliers. The rank order of the top 10 suppliers in the LED market for 2011, by revenue of packaged LED components, is:

1. Nichia
2. Samsung LED
3. Osram Opto Semiconductors
4. LG Innotek
5. Seoul Semiconductor
6. Cree
6. Philips Lumileds
8. Sharp
9. Toyoda Gosei
10. Everlight

LED supply by region - Geographically, Taiwanese and Chinese suppliers gained market share at the expense of the other regions. China’s improvement in product quality, coupled with gains in the domestic market, fueled the growth from 2% market share to 6% in one year. Korean companies lost share in the slowing market, even though they were the most aggressive in increasing capacity during the ramp-up in 2010. The expansion by Philips Lumileds, Cree and Osram Opto into 6-inch substrates slowed as there was a great deal of excess capacity in their existing 4-inch lines. The Japanese LED business has trended down or flat. However, Nichia and TG are major beneficiaries of the boom in tablet computers. Osram Opto gained a major design win, which propelled its visible LED component business to more than $1 billion.

Market growth by segment - 

Mobile - This segment stayed flat in 2011, at $3.4 billion. The overall decrease in the mobile phones market was offset by a sharp rise in tablet display and flash applications. A major development in this segment is the move to OLED displays. Approximately 50% of smartphone displays are expected to be OLEDs by 2016.

TV/Monitor backlights - The LED revenue for TV and monitor backlights was $3 billion in 2011, but it is projected to drop substantially by 2016. The key disruptive factor in this segment is the introduction of low-cost, direct-backlit technology, targeted at sub-42-inch LCD TVs. This new technology can result in significant savings in the bill of materials (BOM), reducing the gap between LED- and CCFL-backlit TVs. These TVs are known as “chubby TVs” since they are thicker than the slim edge-lit design the industry has been touting for the past few years.

Lighting - The same supply conditions that reduced the price of LEDs increased the demand for packaged LEDs in lighting applications from $1.2 billion in 2010 to $1.8 billion in 2011. System efficacy, rather than LED efficacy, was the gating factor in 2011. The LED luminaire and replacment lamp market was $9.3 billion in 2011, an increase of 45% over 2010. The market for LEDs in lighting is expected to demonstrate substantial unit growth over the next five years, but revenue growth will be much lower due to pricing pressure.

Automotive - Revenue reached $1 billion in 2011 We expect a 5-year CAGR of 34% for LED headlamps. In addition to the styling issues, this is part of the trend to convert all front lighting to LEDs, as it will provide more front-end room for the car designer and reduce the overall system cost. Revenue for interior automotive lighting will show a modest decline over the next five years as instrument panel adoption reaches saturation and the market declines with prices.

Future growth - The revenues for the LED packaging industry are expected to be flat in the next five years. With excess capacity in the industry there is a threat of unsustainable prices. Consolidation–both vertical and horizontal–can help improve margins. To further improve profit margin, product strategies such as LED packages tested for high temperature, narrow binning, high CRI, directional /multidirectional LEDs, and embedded controls are being tried by the market.

LED Lighting Experienced Strong Growth Surge in 2011 - Strategies Unlimited has reported 69% year-on-year growth in total sales of LED lamps and luminaires, and expects further growth in the next few years for LED lighting products and LED components for lighting. Despite a decline in the overall market for lighting products in 2011, the LED lighting market (including both LED lamps and LED luminaires) had an exceptionally good year in 2011, growing by 69% year-on-year. Vrinda Bhandarkar, Director of Research for LED Lighting with market-research firm Strategies Unlimited, said that the total revenue from the LED lighting market was $5.5 billion in 2010 and $9.4 billion in 2011. The results were presented during the Solid State Lighting Investor Forum at Strategies in Light 2012, which opened today.  Moreover, the LED lighting market is predicted to grow at a compound annual growth rate (CAGR) of 20% from 2011 to 2016. http://www.ledsmagazine.com/news/9/2/9

Commercial and industrial lighting was the biggest growth sector. Bhandarkar said that almost 23 million LED-based downlights were sold worldwide during 2011. Compared with previous forecasts, the growth in sales of LED lamps has been scaled back, since the products are still expensive and alternatives are available. However, sales of LED luminaires of many types were higher than previously expected. Bhandarkar said that users are beginning to appreciate the benefits of LED lighting, beyond light output. “LEDs allow you to think about quality of light and control, not just quantity of light,” she said.

LED components for lighting

The total market for LED packages used in lighting applications reached $1.8 billion in 2011, up from $1.2 billion in 2010, according to Ella Shum, Director of LED Research with Strategies Unlimited. This sector of the LED market is expected to grow at a CAGR of 13% from 2011 to 2016, when it will reach $3.3 billion. The revenue growth for LED components (13%) is less than for LED lighting products (20%) because the average number of LEDs per lamp or luminaire will decrease, and LED pricing will continue to fall. The growth in LEDs for the lighting sector will help to offset the decline in LED revenue from backlighting (which includes LED backlights for TVs and monitors) and mobile sectors (the latter includes notebooks and tablets). Overall, said Shum, the total market for packaged LEDs will grow from $12.5 billion in 2011 to $13.3 billion in 2012. It will stay roughly flat in 2013 and then decline slowly (see chart). The overall CAGR from 2011 to 2016 is forecasted to be -0.2%.

News Updates for the Week of August 15

1.    Getting the LEDs Out by Doug Chandler - Solid-state lighting may save the free world. Someday. Probably not this month.  The reality is that the whole lighting industry, and the broader electrical and construction and design and energy-efficiency markets of the world as well, are all waiting and watching for the light-emitting diode (LED) of their dreams—the one that will finally make incandescent, fluorescent, HID and all the other incumbent lighting technologies obsolete—to emerge onto the market in a blaze of light. http://ewweb.com/mag/electric_getting_leds/ 

2.      LED Market to Expand in U.S., Europe - Analysis from Frost + Sullivan revealed that the light emitting diode (LED) market is primed to grow explosively in the next several years. The study estimated that the market, which earned revenues of almost half a billion in 2010, could reach as high as $2 billion in 2017. The study from Frost + Sullivan concludes that the best way to help narrow that cost gap and continue market expansion is to increase awareness about the benefits of LED technology. Not just for now, but for the future, as well. www.csemag.com

3.      Energy Upgrade California for Commercial Properties - Only single-family detached houses are eligible for Energy Upgrade California rebates and incentives at this time. The Energy Upgrade program for existing commercial buildings is being developed. The energy reduction targets and specific types of upgrades will be tailored to the commercial building envelope and business uses. The launch date will be announced on this website: https://energyupgradeca.org/county/orange/commercial 

4.      Halogen A19 lamps - Bulbrite’s Eco-Friendly Halogen A19 lamp complies with the Energy Independence and Security Act (EISA), which takes effect Jan. 1, 2012 and requires general-service light bulbs to operate up to 30 percent more efficiently than current standards require.  Consumers will gain the benefits of higher efficiency and superior lighting quality, giving them an alternative to CFLs and LEDs. The Halogen A19 is fully dimmable and can last up to 1,000 hours. http://www.bulbrite.com/

5.      USB Receptacles - Developed in response to the surge of consumer portable electronic devices that must be charged using a USB connection, Cooper Wiring Devices’ combination USB charger with a tamper-resistant receptacle is ideal for residential, commercial, educational, municipal and hospitality applications. http://www.cooperindustries.com/content/public/en/wiring_devices.html

6.      Loan Programs Wind Down - The two biggest clean energy programs to come out of the Recovery Act have been the cash grants in lieu of tax credits, and the federal loan guarantees for projects and innovative technologies. The loan programs’ time is winding down. The U.S. DOE’s Loan Programs Office provides a $70 billion dollar investment program in alternative energy, financing a wide range of solar, wind, geothermal, biofuels, fossil and nuclear energy projects. Since March of 2009, the office has issued 42 conditional commitments for loans and loan guarantees totaling over $40 billion with total project costs of $63 billion. Most of the program winds down at the end of the current fiscal year on September 30. There are some project closings and some funds for additional elements to continue through the winter. A $200 million proposal to continue some project financing in fiscal year 2012 is in the next budget. http://loanprograms.energy.gov/

7.      Moat Prospects Dim for Lighting Equipment Manufacturers - A Field of Three Shrinks to One -Philips appears to have won the war of attrition among the giants, with Siemens pushing Osram to be independent and GE's laissez faire approach making it less of a player than before. While the conglomerates typically have strong manufacturing expertise and lower manufacturing costs, they prefer to compete in the market on technology and value added to the consumer, not simply on price. In order to continue pursuing that path in LED lighting, we think the incumbents will need to materially step up research and development, acquisitions, and capital spending in this area to have capable products in an increasingly competitive field. Given that General Electric and Siemens both have more compelling investment opportunities within their broader portfolios, we think their decision to step back from lighting makes sense and is prudent for shareholders. We expect firms like Hubbell, Cooper Industries, and Honeywell to benefit in the coming years from growing demand for lighting controls and quick and easy energy-efficient retrofits for buildings. http://news.morningstar.com/articlenet/article.aspx?id=390212  

8.      DOE Announces Funding Opportunities for Solid-State Lighting: Core Technology Research and Product Development (Round 8) - The U.S. DOE announced two Solid-State Lighting (SSL) funding opportunities on August 12, 2011. Under these funding opportunities, DOE seeks applications for projects to advance research, development, and market adoption of SSL technology. The funding is directed toward two existing DOE SSL R&D program areas for Core Technology Research and Product Development.  DOE is soliciting SSL projects in the following categories:

• Core technology projects focus on applied research for technology development, with particular emphasis on meeting efficiency, performance, and cost targets. Selected projects will fill technology gaps or provide enabling knowledge or data.
• Product development projects focus on using the knowledge gained from basic or applied research to develop or improve commercially viable materials, devices, or systems. Selected projects will develop targeted market applications with fully defined price, efficacy, and other performance parameters necessary for success of the proposed product.

Applications are due November 3, 2011. For more information on the new funding opportunities, visit the DOE website at https://eere-exchange.energy.gov/

9.      2011 ENERGY STAR Products Partner Meeting - With planning for the 2011 ENERGY STAR Products Partner Meeting underway, EPA anticipates that the online meeting registration system will be available to partners in late August.

10.  DOE Relaunches its Energy.gov Website  - DOE announced on August 4 that it has relaunched the Energy.gov website as an interactive information platform offering localized data and resources to save energy and money. The new website makes it easier for visitors to get information specific to their cities, counties, and states, including information about energy tax credits, rebates, energy saving tips, and grant opportunities. http://energy.gov/ Also available on the EERE Web site: http://apps1.eere.energy.gov/news/enn.cfm

11.   Consumer Sentiment Index Falls to Lowest Since 1980 - The preliminary August reading on the consumer sentiment index fell to 54.9 in early August, down from 63.7 in July, and has fallen for three straight months. The August reading was well below the median forecast of 63.0 among economists polled by Reuters. 8/12 Reuters

12.  NAESCO Northeast Regional Meeting, September 19, 2011 - Con Edison Building, 4 Irving Place, New York, NY - http://www.naesco.org/events/meetings/northeast/2011/registration.htm

Monthly Special Feature… LED Market Grew by 93% in 2010, Driven by Backlights

The worldwide high-brightness (HB) LED market leaped from $5.6 billion in 2009 to $10.8 billion in 2010, a growth rate of 93%, according to market research firm Strategies Unlimited. The total market is expected to reach $18.9 billion in 2015, representing a compound annual growth rate (CAGR) of 11.8%. LCD monitor and TV backlights led the growth spurt, followed by mobile display applications. Ten companies accounted for more than 75% of the HB-LED market. The rank order, by revenue, of the top 10 suppliers in the HB-LED market in 2010 is: http://www.ledsmagazine.com/news/8/2/26

1. Nichia
2. Samsung LED
3. Osram Opto Semiconductors
4. Philips Lumileds Lighting
5. Seoul Semiconductor
6. LG Innotek
7. Cree
8. Sharp
9. Toyoda Gosei
10. Everlight

LED market in 2010 by region. Source: Strategies Unlimited http://www.strategies-u.com/

Several paths led to this impressive growth. Samsung LED, Seoul Semiconductor, and LG Innotek rode the boom in the LCD TV and monitor backlight market. Osram rode the rise of the Chinese HB-LED market, especially in the automobile sector. Lumileds’ success in high-power backlight products, cell phone flash, and architectural lighting contributed to much of its success. Cree’s dedicated focus on lighting ensured its continued strong position in the solid-state lighting revolution.

Meanwhile, Chinese LED suppliers captured two percent of the market. While Chinese HB-LED technologies are currently three to five years behind the rest of the world, Strategies Unlimited expects that huge investment in the SSL industry by 2015 will help close the gap. Investments of $17.4 billion have been announced for 2010-2015, and government subsidies and policies are helping companies to buy MOCVD systems, as well as driving initial adoption, for example in street lights.

Applications

Mobile products remained the biggest application HB-LED in 2010, with 39% of the market, while backlights for TVs and monitors accounted for 33%. Lighting and automotive both accounted for 8%, signs were 6%, and other applications comprised the remaining 6%.

While LCD television/monitor backlights accounted for the largest part of the jump in HB-LED revenue in 2010, mobile applications were also significant contributors. In particular, the large rise in PC notebook sales and the penetration rate for LED backlights used in notebooks doubled HB-LED revenue over 2009.

Strategies Unlimited expects television and monitor backlights to continue to be a strong engine for growth in the next two years, and then flatten out in 2013. The CAGR for backlighting is expected to be more than 16% from 2010–2015.

LED luminaire design, rather than LED performance, was the primary concern for the lighting market in 2010. HB-LED component revenue for lighting was $890 million in 2010.

Solid-state lighting will become the key market driver in 2014 because of the worldwide focus on energy efficiency and the phase-out of incandescent bulbs. The forecast CAGR for HB-LED components for lighting from 2010–2015 is 39%.