LED industry at a critical crossroad, says iSuppli

After three consecutive years of explosive double-digit growth, the rate of expansion in the solid-state lighting (SSL) industry declined dramatically in 2005 to 5.8% and led to a slowdown in the larger LED market, said iSuppli. The research firm explained that the deceleration was primarily due to aggressive reductions in pricing of high-brightness (HB) blue and white LEDs, a deceleration in the increase of demand for LEDs from the mobile phone market, and the slower adoption of SSL in new applications.

In 2005, backlighting of LCDs and handset keypads accounted for 25% of total SSL industry revenue. However, during the past year, the growth rate in unit shipments of mobile phones was 15%, significantly lower than the 25-30% growth rates in 2003 and 2004.

iSuppli estimates that ASPs (average selling prices) for blue HB LEDs used in keypad backlighting declined 26% and ASPs for white LEDs employed in handset backlighting decreased about 20% in 2005. The aggressive ASP erosions still occur in 2006.

A "bright" future?

The SSL industry now finds itself at a critical crossroad, said Jagdish Rebello, director and principal analyst with iSuppli. The growth drivers for the SSL industry are shifting from backlighting of small-size LCDs to new applications requiring high-flux LEDs–also referred to as ultra HB (UHB) LEDs."

iSuppli projects that the market for LEDs will have a compound annual growth rate (CAGR) of 10.6% through 2011, when it will exceed US$9.1 billion. A significant portion of this growth will be driven by UHB LEDs. In 2011, UHB LEDs will account for approximately 33% of the total LED market–up from 4% in 2005.

The backlighting of large-size LCDs, new signage and decorative illuminations and exterior automobile lighting will fuel future growth, iSuppli predicts.

Several LED suppliers, backlight unit (BLU) manufacturers, LCD panel makers and TV/monitor OEMs are actively investigating the use of LEDs for backlighting of large-size LCDs. Several designs are being investigated and prototypes are being demonstrated, iSuppli noted.

While LED BLUs offer the advantages of richer color gamut, better contrast, lower power consumption and reduced thickness, LED BLUs now are still significantly more expensive than cold cathode fluorescent lamp (CCFL) BLUs.

iSuppli projects that commercial shipments of large-size LCDs with LED BLUs will commence in 2007. However, penetration rates will be small, at less than 10% through 2009. As progress continues to be made in improving the performance of LEDs, while driving down pricing, high- power LEDs will slowly start to penetrate the general lighting market.The global general illumination business represents a US$16 billion market for light bulbs and an additional US$25 billion market for lighting fixtures, drive circuitry and accessories. LEDs now have a negligibly small percentage of this market.

Applications such as LED flash lighting and garden lighting are slowly creating awareness among customers and reducing the educational barrier to the adoption of LEDs in lighting. iSuppli projects that LED light bulbs will begin to address the residential and enterprise general illumination market in 2010.

Turn on the LEDs

In addition, as LED technologies advance, new applications will emerge that traditional lighting sources like incandescent lamps and fluorescent bulbs will simply not be able to address. The near monochromatic emission of LEDs and their resultant capability to tune their spectral characteristics will culminate in dramatic lighting applications that have not yet been conceived.

If all LEDs do is replace traditional lighting sources in existing applications, the success of LEDs will be limited. However, iSuppli believes that just as the replacement of vacuum tubes with solid-state transistors revolutionized the electronics industry with dramatic new applications, so too will the LED for the lighting business.

Lighting designers, OEMs and module manufacturers are striving to harness the power of LEDs in new lighting applications and to advance the overall lighting industry. The market is expanding and investments in innovative designs and creative solutions can be well justified.