Growth in smart phones, media tablets, and ultrabooks may be getting the lion’s share of electronics industry headlines these days. But industry watchers say the market for solid-state lighting (SSL), with LEDs in particular, has a bright future as well.
Many electronic components distributors have been keen to the growth potential of LEDs in recent years, but others throughout the supply chain are just starting to take note. Industry analyst Dale Ford, vice president of research firm IHS iSuppli, pointed to SSL as a “sleeper” growth category in a recent interview about hot electronics markets for 2012, calling LEDs a growth market that “may not be on everyone’s radar screen.”
“But LEDs are showing up everywhere,” Ford said, pointing to consumer products such as TVs and cars as well as commercial and industrial lighting as popular applications for the evolving technology. “We expect LEDs to start seeing some meaningful traction in solid-state lighting applications.”
Other sources agree. A recent Marketresearch.com report forecasts a 7.7% compound annual growth rate for the global LED market between 2010 and 2014. Worldwide demand for more energy-efficient lighting, combined with a preference for LED technology in both the government and public sectors, are fueling the growth—although the high price of LED technology continues to pose a challenge to more robust growth.
Here at home, a government-mandated phase out of certain incandescent light bulbs begins this month and is expected to spur growth for more advanced lighting solutions in general, including LEDs. The federal Energy Independence and Security Act of 2007 requires that all general-purpose light bulbs that produce 310 to 2600 lumens of light be 30% more energy efficient by 2012 to 2014. The efficiency standards start with 100-W bulbs in January 2012 and end with 40-W bulbs in January 2014.
Much of the growth in LED technology has been driven by the LCD market, but Ford says it is beginning to penetrate more general lighting applications—due in part to government mandates worldwide, but also to advances in the technology. A Freedonia Group report last year pointed to LEDs as the fastest-growing segment of the advanced lighting solutions market through 2015, noting that improvements in power and light quality combined with a dramatic decrease in pricing will expand their use in general lighting applications.
“You’re going to continue to see an interest in LEDs,” Ford agreed. “[Manufacturers] need to address cost issues, and they are starting to address heat issues. They are starting to get over some of these hurdles.”
LED Growth In China
One of the largest growth regions for LED technology is China, where analysts expect the market to reach nearly $7 billion this year on its way to $11 billion by 2015. That’s equivalent to a five-year compound annual growth rate of nearly 18%, according to a 2011 mid-year report from IHS iSupply. IHS expected China’s LED market to finish 2011 at nearly $6 billion, a 5% increase over 2010.
“Driven by markets including backlights for liquid crystal display (LCD) TVs and street lighting, LEDs have become a hot item for manufacturing in China and also an attractive investment segment in the country,” Vincent Gu, senior analyst for China electronics research at IHS, said in the report. “Moreover, official government commitments to the industry appear to be paying off dividends.”
China’s market for LEDs is broad, including LED displays, traffic signals, automotive uses, LCD backlighting, handset keypads, digital still camera flashlights, decorative lighting, street lighting, and general illumination. IHS expects street lighting to be the largest segment, reaching $1.8 billion this year. LCD backlighting is also poised for strong growth based on the rapid adoption of LEDs for large-sized LCD TVs and laptops, generating $1.8 billion by 2015 (up from $713 million in 2011).
Mirroring the global trend, increased demand in China’s general lighting market is expected as well. But despite LED popularity in China, the country’s domestic LED industry remains in its infancy compared to other regions, such as the United States and Taiwan. IHS cites lagging technological capabilities in the country and the scarcityof adequately experienced management teams and R&D engineers to lead the way as key reasons the country trails in the field.
“Furthermore, the lack of Chinese intellectual property in core and upriver segments—such as in LED wafers—is a serious concern,” according to the report.
Still, industry watchers expect the domestic market to grow, especially given the many government subsidies and tax incentives for investment in LEDs local manufacturers enjoy.
“China’s LED players enjoy ample funding from local and government sources, which should help domestic entities capture the large Chinese end demand for LEDs in the future,” the report concludes.
Such actions will help fuel the global increase, IHS’s Ford anticipates.
“Whether it is automotive applications, homes, commercial applications, or public areas, [advanced] lighting solutions are going to really start ramping up,” he said. “We expect some pretty good growth there, going forward.”