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February 19, 2010...When it comes to the broader LED industry and supply chain, Strategies in Light, held February each year in San Jose, California, is the place to be in the US for the latest market updates and technology. From its humble beginnings as a "here comes the LED technology" conference focus back in 1999/2000, Strategies has definitely shifted its strength into an exhibition platform (80+ exhibits this year). As the LED market has matured, the event has followed the trends "up market". Not that many years back, it was about the materials, processes and technologies that created LEDs. As the supply chain has consolidated and narrowed (as they always do), the 2010 event continued the trend to be less about "how you do them" and more about "how you put them to use", with a particular focus in the lighting space. If you engineer LED luminaires/fixtures, and are looking for the latest trends in "the ingredients" that make a better solid state light, or LED backlight, there was plenty to hear and see. We'll outline just a few of the nuggets for the broader LED industry and its applications.

As with any Strategies, major highlights always come from Strategy Unlimited's "Dr. Bob" Steele, and his High-Brightness LED Market Review and Forecast. True to the focus, his market numbers, which we always consider to be the best in the industry, are tallied from the package LED level. The 2009 numbers were, in a sense, no surprise. From Q3 2008 to 1Q 2009, the LED industry pretty much fell off the cliff. Bob's look at 18 publicly traded LED manufacturers showed a 29% drop during that period, and likely those represented more stability than the market in whole. The exciting thing was the bounce-back that occurred from Q1 2009 through the rest of the year, as numbers climbed 89% from their lows, finishing 2009 a modest 9.5% above the overall 2008 numbers. A near-death experience isn't so traumatic when the hindsight shows growth. Lighting and display-containing segments reflected good double-digit growth (24% and 17%), while traffic signals experienced an 18% downturn, which we would attribute to the combination of application saturation (most signals are now LED-based) and the tighter capital equipment budgets that most municipalities are working with.

While mobile phone handsets and smart phones showed an overall decrease, those stalwarts which have driven the LED market growth for much of the last decade have been replaced in their preeminence by LED backlights and displays. In 2008, only about 10% of the laptops on the market had LED backlighting. For 2009, that number had shifted dramatically up to 50% penetration of the technology in the new models. For 2010, predictions have ranged towards expecting 90-100% penetration into the notebook/netbook space. LED-based backlighting in monitors and TVs is shaping up to be a massive market-maker for 2010 as well. Numbers vary, ranging up to forecasts of 39 million LED-backlit TVs for 2010, but Bob felt more comfortable with something in the 22 million unit ballpark, representing about 15% penetration, and the start of a move that could be expected to lead to near 100% adoption over a fairly short span.

LED lighting is rightly generating a lot of buzz, and the market isn't disappointing. While anything but big in terms of its penetration, it is clear that momentum has arrived with 24% segment growth in 2009 and 32% predicted here in 2010. Overall, Strategies Unlimited is forecasting a 44% compound annual growth rate (CAGR) for the lighting segment looking out the next 5 years. That represents a growth in LED sales from less than $1B now to something more in the $5B range by 2014. General lighting, and especially TV and display backlighting, will be driving the LED industry to $8.2B, a predicted 53% growth, here in 2010. Even more exciting is Bob's expectation of a overall 30% CAGR for the HB-LED industry, reaching over $20B worth of 'packaged LED value' in 2014. Significantly, those TVs and displays will represent half of that 2014 industry revenue. With LEDs continuing their drop in "dollars per lumen" there would appear to be no doubt more than a little increase in some key capacity areas will be required, including substrates and in the LED chip production equipment arena. Companies like Aixtron and Veeco (the A to V's of MOCVD reactor-suppliers, which underpin the LED manufacturing technology) are seeing this ramp now, and reporting the revenue growth to match.

Interesting tech... There were also some technology highlights that caught our attention in the LED arena. The first was in a discussion with Eran Fine, CEO of Oree (not to be confused with "Cree" when looking at the name badges). Oree, which means "My light" in Hebrew, was showing "planar LED" technology that could find its way into a number of applications in the future. In the simplest description, Oree starts with existing commercial LEDs, and redirects the light across a reflective surface a little smaller than the size of a business card. The result is a glowing RGB-driven panel, that is initially targeted to bring direct-backlit capabilities, most notably local dimming, to the LED TV manufacturers, at a cost-point closer to edge-lit solutions. It also provides the manufacturers with the ability to deliver the thinner TV solutions that are the edge-lit technology has also made popular. We had the pleasure of meeting Oree's chairman, former CEO of Philips SSL business unit, Peter van Strijp. Mr. van Strijp's involvement pretty clearly indicates Oree's plans to move the technology into the "glowing panel" arena of general purpose lighting. Given the recent advances in LED efficacy, it's not unreasonable to assume that an approach like Oree's will be able to give OLEDs a run for their money for a number of years while that technology develops.

We also took advantage of the opportunity to spend a little time with both Bridgelux and Luminus Devices, two LED companies that are well positioned to keep a healthy pressure on the current top players in the arena. Bridgelux has just rolled out a wide offering of multi-chip packages that take a number of individual unpackaged LED die, and places them on a single compact board (think dime to half-dollar size). The packages take the "bright egg" approach that covers the full array with the yellow-orange toned phosphor, making it look somewhat like the yolk of a small egg. The company claims to be only one of two significant players that is still making progress on 'lateral chip' designs. Virtually all the others are focused on vertical designs, which are not yet as cost effective as the laterally oriented chips. With warm white efficacies of better than 75 lumens/watt, their new ES line is targeted at enabling LED replacement lamp developers to exceed the approximate 45 lm/w system efficiency requirements that are bundled into the latest Energy Star requirements. Bridgelux' RS series moves up the brightness curve, and is rated to provide 3000 lumens in warm white, and 4500 lumens in cool white from a roughly 50w input. They've taken the a design approach to maintain those lumens in a hotter platform (referred to as "hot" lumens), to allow luminaire developers to design their systems with LED test point temperature of up to around 60-degrees C (ouch... don't touch), which trickles down to real-world luminaire case temperatures instead of the more idyllic, but seldom achieved 75 to 80 degrees Fahrenheit. To round out the line, they're also offering the LS series, which uses the "L" for "little", producing 240 lumens in warm white an up to 360 cool white lumens from a 4 to 4.5w input, and is targeted at MR-16 and decorative replacement lamps. Notably, their approach is promising pricing in reasonable quantities in the 1 to 1.5 cent per lumen range as a result of their lateral-chip manufacturing efficiencies. That compares favorably with some of the new offerings out there, including Cree's new MPL-EasyWhite multi-chip package which ballparks in the 2 cents per lumen range. Obviously, each will claim their advantages, but a competitive market is a healthy market for growth.

We've always been appreciative of technologies that have a clear market niche that can create immediate profits, and which can then be leveraged into broader and potentially more lucrative arenas. Luminus Devices has always been one our favorite examples of this, with their extraordinarily large "photonic lattice" chips that lent themselves marvelously to the DLP-TV arena. The PhlatLight brand smoked that market, commanding impressively quick market share, with performance to match. Unfortunately for Luminus, the DLP projection TV market completely dried up as the LCDs used in flat panel TVs and displays plummeted in price, with consumers voting for the thinner solutions as the prices neared equalization. While Luminus LEDs continue to capture market share in the "pocket" and now standard projector market, they had a bit of a rough road as one market dried up before their technology had really reached an adoption stage in the up and coming general lighting market. While well suited for the 'multiple kilo-lumen' oriented market that will eventually supplant those metal-halides hanging from our gymnasiums and factory ceilings, they hadn't gotten there yet and have suffered for it. Their new CEO, Keith Ward, is a big believer in how "LEDs will change everything about how we 'do' lighting' as the rate of innovation picks up speed." Amen to that. Keith's experience is in the "real" lighting industry, and he's keenly aware of the gaps that exist between the so-called "chipheads" the "lighting folks". It also turns out that Keith is heading a NEMA task force called Enlighten America that is 2 years into a 5 year plan to reach out to US building owners and operators with the "enhanced lighting energy efficiency = enhanced competitiveness" message. Keith is featured there on an introduction video that sums up the message succinctly (and notably, reaches towards the same audience that our SSL Summit series is beginning to bring in... more 2010-2011 series updates coming soon).

The future is bright indeed...

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Tom Griffiths - Publisher

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