© 2012 Woodside Capital Partners International
Research Report: LED Lighting
Analyst: Martin Jackson
Table of Contents
Figures ....................................................................................................................................... 1
Introduction ............................................................................................................................... 2
Market ........................................................................................................................................ 3
Legislation ................................................................................................................................. 6
Intellectual Property .................................................................................................................. 7
Design Issues ............................................................................................................................. 8
Supply Chain .............................................................................................................................. 9
Opportunities ........................................................................................................................... 10
Disclaimer ................................................................................................................................ 13
Figures
Figure 1 Haitz's Law (Source: Materials Research at Wisconsin-Madison)............................................... 3
Figure 2 GaN LED Applications (IMS 2011) ........................................................................................ 4
Figure 3 Worldwide Lamp Market (Source: ELC/CELMA) ...................................................................... 4
Figure 4 Worldwide Luminaire Market (Source ELC/CELMA) ................................................................. 4
Figure 5 60W Equivalent LED Bulb Prices (LEDinside, Jan 2012) ........................................................... 5
Figure 6 Lighting Legislation (Various Sources) .................................................................................. 6
Figure 7 LED Intellectual Property (© WCPI, LED Lighting Company) .................................................... 7
Figure 8 Typical Lamp Design Considerations ..................................................................................... 8
Figure 9 LED Supply Chain .............................................................................................................. 9
Figure 10 Sample Companies in the LED Value Chain........................................................................ 11
© Woodside Capital Partners International
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LED Lighting
Introduction
According to the 2011 European Commission green paperi up to 50% of total electricity consumption in
office buildings is used for lighting and the comparable figure for residential buildings is 10-12%. Overall,
lighting represents a significant proportion of electricity usage and the worldwide drive to conserve energy
and reduce CO2 emissions is driving the adoption of low energy lighting technologies.
In 2010 the global lighting industry was estimated to have revenues of $90B growing to $130B by 2020ii.
In Europe alone the industry is estimated to have revenues of $25B and employ over 150,000 people
(European Commission). The emerging markets such as India represent considerable opportunities for
growth as they transition to electricity based lighting solutions.
The traditional incandescent lamp has been in production for over one hundred years and, although many
value the quality of its light, its very low efficiency is becoming increasingly expensive for users.
Consequently many countries have introduced phased legislation to ban incandescent lights and replace
them with higher efficiency technologies such as fluorescent, LED (Light Emitting Diode) and OLED
(Organic Light Emitting Diode).
LED lighting technology is attractive because of its high efficiency, long lifetime and the range of
applications: backlighting for displays, automotive and general lighting.
In recent years there has been considerable investment in lighting technologies with a total estimated
$800M of venture capital invested in 2008-2010. This does not count the considerable investments by
established players such as Cree, Osram and Philips.
The remainder of this note will concentrate on the application of LEDs to general lighting applications.
© Woodside Capital Partners International
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LED Lighting
Market
Demand in plentiful supply
The continued population growth and modernization of the world is increasing the worldwide demand for
lighting. The lighting industry has been given further impetus by legislation of governments across the
world to lower the carbon footprint, eliminate hazardous substances and increase energy efficiency; the
timescales for action under this legislation is relatively short and this has driven the lighting industry to
change and opened up opportunities to new players.
Historically the main lighting technologies have been incandescent and fluorescent technologies; in more
recent times halogen technology has been popular and this has had its lifetime extended with the
introduction of low energy technology. LED technology, the most recent entrant in lighting has seen
considerable investment in recent years, as it is much more efficient than the alternatives and does not
use hazardous substances such as mercury.
LEDs have long been used as indicators on equipment but more recently have found application in new
areas as their efficiency has improved. In 2000 Haitz, working at Agilent, noted that LED light output
approximately doubles every year, see Figure 1, and the progression of improvements has opened up new
applications as the output increases and the cost decreases. An LED, provided the system considerations
are heeded, is much more reliable and has a significantly longer lifetime than alternative technologies.
Figure 1 Haitz's Law (Source: Materials Research at Wisconsin-Madison)
Mobile phones, with their tight space constraints, were an early adopter of LED based LCD backlight
technology and televisions are now supplanting CCFL backlights with LED ones as the LEDs enable thinner,
more reliable televisions with better contrast ratios thanks to adaptive backlights; in the longer term it is
likely that OLEDs will supplant LEDs in these two applications and although mobile applications are
starting to adopt OLEDs the large form factor of televisions is still early in the learning curve.
© Woodside Capital Partners International
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LED Lighting
Figure 2 GaN LED Applications (IMS 2011)
Two other new application areas for LED lighting are automotive and general lighting. IMS Research
predicts significant growth in general lighting, see Figure 2, over the next few years. In the general
lighting field the alternative technologies will gradually be displaced by LED lighting. Over time the number
of lamps required will fall, see Figure 3, since LED reliability will lengthen the replacement cycle
considerably. The demand for luminaires (light fixtures) will continue to rise, see Figure 4, driven by new
building and refurbishment cycles.
Lamps Market World & Europe
($M)
25000
20000
15000
Lamps LED Europe
Lamps All Europe
10000
Lamps LED
Lamps All World
5000
0
Figure 3 Worldwide Lamp Market (Source: ELC/CELMA)
($M)
Luminaires Market World & Europe
80000
60000
Lums LED Europe
40000
Lums All Europe
Lums LED
20000
Lums Total
0
Figure 4 Worldwide Luminaires Market (Source ELC/CELMA)
© Woodside Capital Partners International
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LED Lighting
The overall market for LEDs is estimated to grow strongly with the lighting segment alone forecast to grow
at a CAGR of 33% (Strategy in Light (US), Feb 2011) over the next three years.
There has been considerable investment across the LED supply chain in recent years, from LED production
through to LED based lighting systems.
China is a major producer of LED technology and the Chinese government, in addition to closing
incandescent factories, has subsidized LED production plants. SEMI (www.semi.org) reported that
equipment spending on LED fabs in China alone increased from $606M in 2009 to $1.79B in 2010
estimating that GaN wafer capacity will increase by 300% to over 1.28M 2” equivalent wafers per month
in 2012. 6” wafer production is now being installed as LED manufacturers have transitioned from 2”
wafers through 4” in order to take advantage of the cost and production advantages of the larger wafers.
SEMI estimates that worldwide equipment spending after a 36% increase in 2011 will decline by 18% to
$1.8B in 2012, led by $719M investment in China. Overall 29 new LED fabs came online in 2011 with a
further 16 expected in 2012, with Taiwan still accounting for 25% of worldwide LED capacity and China
22%. In 2011 solid state lighting revenues were $2.5B with a predicated growth to approximately $20B in
2020.
Established players such as GE, Philips, Osram, Nichia and Cree have made significant investments in
LED technology. In addition, the venture capital industry has invested over $800M in the lighting industry
from 2008-2010 (Source: Cleantech Group, Mar 2011) with the top funding recipients being Bridgelux,
Luminus Devices, Lattice Power, Luxim and Lemnis Lighting; note that Luxim has developed “Light
Emitting Plasma” technology, which is not LED based, for very high brightness industrial and commercial
applications.
Overall the supply capability within the LED industry has risen faster than the demand and this has served
to drive down LED prices; prices fell by an average of 16% alone in December 2011, see Figure 5.
Equivalent to 60W Standard Bulb
800-810lm, Warm White (US$)
Dec. 2011
High
Low
Avg
Change
K-IM, Avg
Japan
39.8
38.6
39.2
-15%
48.4
Worldwide
47.9
18.9
33.5
-16%
41.6
Figure 5 60W Equivalent LED Bulb Prices (LEDinside, Jan 2012)
Although prices have declined rapidly they are still too high,
adoption. The combination of the continued downward price
power output and quality of light are required to bring
applications have been shown to have a positive ROI now
expected to appear until 2015/2016.
© Woodside Capital Partners International
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compared to alternatives, for mass market
trend, bulb lifetime, improvements in light
true mass market adoption. Commercial
but mass residential applications are not
LED Lighting
Legislation
Legislation is driving change in the general lighting market
EU
Japan
Korea
Russia
China
US
2010
2015
2020
Figure 6 Lighting Legislation (Various Sources)
Many countries, as shown in Figure 6, have a timetable for the phased banning of incandescent lamps,
starting with the most inefficient, 100W or more, devices; uniquely Australia completely banned
incandescent lamps from the end of 2010. The United States has Federal legislation to ban incandescent
lights starting in 2012 although this date has already been pushed back once; some states within the
union have a more aggressive timeline for the banning of incandescent lamps with California looking to
ban incandescent lamps by 2018.
© Woodside Capital Partners International
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LED Lighting
Intellectual Property
Intellectual Property is already critical
Figure 7 LED Intellectual Property (©
(©Woodside Capital Partners International, LED Lighting Company)
Across the LED lighting value chain, from the basic LED through to luminaires, iintellectual
ntellectual property is key.
The relationships between companies, as exemplified in Figure 7,, are already complicated. Key companies
in the ecosystem such as Nichia, Philips
Philips, Osram and Cree have significant patents in the field of LED
lighting and are actively licensing and enforcing them. Indeed Philips claim to own 70% of the patents in
the space charging between 3% and 5% of net revenues unless the LED components are licensed from a
qualified supplier.
The IP activity is across the entire LED lighting supply chain from Nichia,, a key LED manufacturer,
through to final luminaires. For instance white LEDs use a phosphor to convert between the LED’s blue
light and the white light required. The phosphor can either be built into the LED or remote from the LED
within the lamp housing; Cree has crucial patents iin
n the field of remote phosphors that it has licensed to
other players in the market and is actively looking at companies that use a remote phosphor that have not
licensed their technology.
In order to play successfully in this field new companies will need to take licenses and one way to reduce
the cost of these licenses is to ensure that they have developed tradable intellectual property. There are
many opportunities to develop such IP because innovation is required acros
across
s the value chain: not just in
materials and components but also in areas such as the challenges of integrating a LED light into existing
infrastructure and developing LED based luminaires where the unique properties of LEDs can be exploited.
For example, US based Bridgelux, a relatively new player in lighting has over 100 patents and patent
application filed in the US in the field of LED manufacture and design
design.
© Woodside Capital
tal Partners International
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LED Lighting
Design Issues
Design issues are an opportunity
The design of a lighting solution is a multi-disciplinary problem whether for a lamp that has to be
compatible with an existing socket (Incandescent, CFL, Halogen) or for a new luminaire. Figure 8 shows
some of the design issues that have to be addressed in the design of a lamp replacement.
Heat
Power
Factor
EMI
Issues
Lamp
Phosphor
Dimming
Optics
Figure 8 Typical Lamp Design Considerations
In the lamp replacement market LED lamps must conform to the existing constraints whilst not
introducing new issues:
•
Dimming – existing infrastructure uses a variety of dimming circuits that provide some challenges
for LED based solutions.
•
EMI issues – for efficiency LED drivers typically use switching inverters to convert between the
input voltage and the current required by the LED. The currents can be high so there is the
potential to generate electromagnetic interference (EMI).
•
Heat – although LED lamps are significantly more efficient than conventional solutions the lamp still
generates heat. The LEDs themselves need to be managed carefully to avoid exceeding critical
junction temperatures so cooling is critical – the heatsink is typically a significant proportion of the
lamp cost. Heat is also the enemy of other components such as electrolytic capacitors that can dry
out and cause reliability issues.
•
Power factor – incandescent and halogen lamps are essentially resistive elements but LED lamp
drivers can look capacitive so that power factor correction is required.
•
Phosphor – white lamps use blue LEDs to drive a phosphor that generates white light. The
phosphor can be within the LED or remote from it. Conventional phosphors can be used but there
are also companies such as Nanoco (UK) developing quantum dot based materials.
•
Optics – LEDs emit over a relatively narrow solid angle compared to existing technologies.
Similar issues arise with the design of luminaires although the increased reliability presents new design
opportunities. Overall there is considerable scope for innovation in the design of LED based solutions.
© Woodside Capital Partners International
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LED Lighting
Supply Chain
Size matters
Figure 9 LED Supply Chain
Figure 9 shows a partial view of the LED supply chain – there are many more players than this, especially
in Taiwan, the leading
ding producer of LEDs, and China: The Climate Group estimates that there are over
2,200 manufacturers of LEDs, packages and luminaires in China. In addition, according to Strategy
Analytics, China consumes 46% of high brightness LEDs in 2009 with the USA at 30% and Europe at 17%.
LEDs not only offer significant user bene
benefits
fits but also, for those who can afford the capital expenditure,
manufacturing benefits: the process innovation in the semiconductor industry that has driven Moore’s law
for transistors can be applied to LED manufacturing, improving devices whilst driving down the cost. The
major players in the industry, such as Philips and Osram,, have already made the move from 4” to 6”
wafers; a line making this move approximately doubles production capacity. This level of manufacturing
innovation has not been possible in the lighting industry before and requires significant capital
expenditure. As with the semiconductor industry it is likely that only the gorillas of the industry will be
successful. China, as evidenced elsewhere in this note, is investing heavily in this space, subsidized by the
government; undoubtedly several large players will emerge to compete with the established Western
companies.
© Woodside Capital
tal Partners International
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LED Lighting
Opportunities
Despite the massive capital investments required to be successful in LED lighting there are still
opportunities across the supply chain. Companies may be able to carve out niches for themselves or
develop IP that is attractive to the large players and be acquired as Lumileds was by Philips in 2005.
Within each stage of the supply chain there is potential, for example:
•
Materials: Phosphors, for example, are a key component of LED lights and the ability to tune the
spectrum of a light to match, say, the sun is critical. Presently many phosphors use heavy metals,
such as Cadmium, in small quantities and have escaped governmental bans on hazardous
substances; over time it is possible that these may need to be removed. Some companies, such as
Nanoco (UK) and QD Vision (US), are pursuing the development of quantum dot based materials
to replace phosphors; quantum dots have the advantage of higher efficiency and a better color
gamut but have to be proven to be low cost in high volume.
•
Drivers: Improving the efficiency and meeting the constraints of LED lamp design provide an
opportunity for improving driver design. Reducing the component count and eliminating unreliable
components such as electrolytic capacitors are immediate opportunities but in the medium term
there are opportunities to provide higher integration using some of the advanced transistor
technologies. In the longer term drivers can provide the ability to control and monitor LEDs can be
built in to the driver that can couple into lighting control systems.
Many mainstream analog semiconductors company such as Texas Instruments, Fairchild,
Infineon and STMicroelectronics are pursuing this opportunity. A number of interesting startups
such as iWatt, Ikon and CamSemi are also finding ways to innovate in integrated drivers. There
are also opportunities for more efficient discrete devices at higher power levels for larger systems.
LED ballasts, etc: here we expect Superjunction MOSFET providers such as Infineon, Fuji
Electric, and IceMos to participate.
•
LEDs: High lumen output LEDs with better color characteristics are required to be able to truly
replace some of the higher power incandescent lamps.
•
Packages: The lighting industry has developed standardized form factors for their products that
have lasted for decades. Presently there is no standardization for LED packages, which is a
potential problem, but recently (2010) the Zhaga consortium was founded to standardize the
interfaces around LED light engines system and has already attracted over 170 companies
including the industry majors. Established players can benefit from standardization since they
already have a position in the market and newer entrants won’t be able to differentiate themselves.
However in the long term this standardization provides an opportunity for innovative companies to
enter the supply chain without having to design a complete system.
•
Luminaires: LEDs themselves have significantly longer lifetimes than conventional devices, are
available in many colors, have much lower power and are easily controlled. These new
characteristics can remove constraints from existing luminaire design and allow them to be
rethought.
•
Control systems: LEDs are easily controlled and available in many colors. Although building wiring
has traditionally been AC based there are opportunities to use LEDs with DC based schemes with
built-in communication which can be used to build more reliable, better controlled and fully
monitored systems.
There are numerous companies operating within the LED value chain. Some, such as Philips, span
practically the entire space whilst others, Intematix, concentrate on a small part.
Figure 10, below, shows a sample of the companies operating in the space but it should be noted that it is
incomplete, in particular there are many Asian companies operating in the sector that are not listed.
Future notes will look at the opportunities in these areas in more detail.
© Woodside Capital Partners International
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LED Lighting
Sector
Company
Notes
Lighting Companies
General Electric Lighting
Philips
Osram
Zumtobel
In general the lighting companies operate
across almost all of the lighting value chain
and are public companies. Osram is an
exception as it is a subidiary of Siemens
although it is expected to be spun off at
some point.
Equipment
Manufacturers
Aixtron
Applied Materials
ASM International
Halma
Novellus Systems
Suss MicroTec
Towa
Veeco Instruments
The equipment suppliers have done well in
recent years as the industry has invested in
capacity. Upgrades are coming, which is also
good news, as companies strive to increase
capacity further by investing in larger wafer
sizes.
Wafers
Crystal Applied Technology
Crystal Wise
CrystalOn
Iljin Display
Lanjing Science &
Technique
Monocrystal
Rubicon
Sapphire, SiC and GaN wafers are all used
as substrates for LEDs although there are
some companies looking to use silicon.
Silicon is attractive because of its price and
performance.
Phosphor
Intematix
Lorad Chemical
Merck Chemicals
Mitsubishi Chemical
Nanoco
Phosphor Technology
QD Vision
For white lighting the industry typically uses
blue LEDs with either a local or remote
phosphor to convert the blue light to white.
Phosphors usually use rare earth based
materials although quantum dot technology
is being developed by some companies to
elminate these materials. Within the lighting
market there is also an opportunity for color
LEDs for 'mood' lighting.
LED Manufacturer
Cree
Everlight
LG Innotek
Nichia
Osram Opto
Semiconductors
Philips Lumileds
Samsung LED
Seoul Semiconductor
Sharp
Toyada Gosei
There are countless companies supplying
LEDs to the industry between them
companies in China and Taiwan supply over
half the market.
© Woodside Capital Partners International
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LED Lighting
Packaged LED
IPLED
Vexica
Xicato
Although the replacement bulb market is big
in the longer term luminaries designed for
LEDs, rather than incandescents, are
appealing since they can be designed to use
the LED advantages. LED modules are an
attractive way to target this.
LED driver
Bright LED Electronics
The reliability, efficiency, compatibility and
features of LED lighting is driven in a large
degree by the driver ICs: Driver circuits that
can eliminate electrolytics will be more
reliable. Temperature, and hence efficiency,
is critical to LEDs. For replacement lamps
compatibility with existing infrastructure
such as voltage standards, dimming, is key
to early adoption. Adding features such as
monitoring and communication will be
important as the market moves to
replacement luminaires.
Cambridge Semiconductor
Cypress Semiconductor
Diodes
Fairchild
Ikon Semiconductor
Infineon Technologies
International Rectifier
iWatt
Light-Based Technologies
Linear Technology
Macroblock
Maxim
Microsemi
Monolithic Power Systems
NXP Semiconductors
ON Semiconductors
Power Integrations
Richtek Technology
STMicroelectronics
Texas Instruments
Figure 10 Sample Companies in the LED Value Chain
© Woodside Capital Partners International
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LED Lighting
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i
2011 European Commission green paper “Lighting the future- accelerating the deployment of innovative
lighting technologies”
ii
McKinsey “Lighting the Way”, 2011
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