No Joke: LED Technology Fuels Fast Growth in Once-Staid Industry
The future of lighting is in chips.
Light-emitting diodes -- tiny, chip-based lights that for years served only as the power indicator on stereos and coffee makers -- are spreading into a wide array of products and transforming the global lighting industry like nothing since fluorescent and other gas-discharge bulbs emerged just after market-research firm that specializes in LEDs.
Today, the biggest market for LEDs is as the light inside the keypads and behind the liquid-crystal screens of cellphones, followed by applications in automobiles, building lighting and newer traffic signals. Sales of high-brightness LEDs, the kind used in the new products, are estimated to be $4 billion to $5 billion this year, becoming a big component of the $26 billion lighting industry. Sales are expected to reach $10 billion by the end of the decade, as LEDs spread into TVs and even some types of household lighting.
Drivers can choose from more than 100 colors on the LED-laden dashboards of the newer Ford Motor Co. Mustangs. Boeing Co. is planning to use LEDs throughout the interior of its new 787 Dreamliner, creating lighting environments that may help international travelers adjust to time-zone changes. In some fast-growing Chinese cities, traffic signals that elsewhere would have separate bulbs for green, yellow and red instead use one LED fixture that switches between all three colors.
Philips, the largest lighting company by revenue, is selling flameless candles with LEDs as the light source. It is experimenting with LED-based lights in the shape of bulbs that fit existing lamps, but with a twist -- touching the bulb could turn it on or off or make it change color.
The rise of LEDs is reshaping the lighting industry into layers of companies with complementary skills and unequal value, a change like the one the computer industry went through during the rise of the PC in the 1980s. Companies like Nichia Chemical Corp. of Japan and Cree Inc. of Durham, North Carolina, produce LED chips and sell them to companies that build finished lights. In Asia, some packages for Energizer Holdings Inc.'s LED flashlights are marked "LED by Nichia," a marketing gambit similar to the "Intel Inside" sticker on a computer.
Some entrepreneurial start-up businesses are establishing early leads in fast-growing market niches. Carmanah Technologies Corp. of Canada married LEDs with solar panels to replace lights on marine buoys. It later expanded into aviation and sold easy-to-install runway lights to the U.S. military in Afghanistan and elsewhere.
The technology drove Daktronics Inc. of Brookings, South Dakota, the largest U.S. maker of scoreboards, into other types of outdoor signs, including some for advertising-saturated sites in New York's Times Square and London's Piccadilly Circus. LEDs are even replacing the incandescent light bulb on scoreboards sold to high schools. "It's a much more cost-effective and much better energy source," says Jim Morgan, the company's chief executive.
Daktronics's revenue rose 34% in its fiscal year ended April 29 to $309 million, more than double its 2000 revenue of $125 million. The company has just edged ahead of Asian rival Lighthouse Technologies Ltd. in a race to make the biggest LED screen. Daktronics two months ago unveiled two screens for Dolphin Stadium in Miami that are 42 meters wide, beating a 40-meter one by Lighthouse that sits above a popular tourist street in Hong Kong.
The first LED was built in 1962. The technology remained on the fringes of industry for decades. Nichia and Cree changed all that in the 1990s by broadening the LED color palette, which had been confined to red, yellow and green. The breakthrough came in 1993 when Nichia, and soon afterward Cree, conquered blue -- the last key to creating color combinations that would fill out the rest of the spectrum, including white.
The big manufacturers took notice. In 1999, GE formed GELcore, a venture with chip maker Emcore Corp., to get back into the LED business. "The game for us is white," says Michael Petras, vice president of GE's commercial and industrial lighting sales. "It's the lighting market."
Osram's semiconductor subsidiary also got into the business and by 2002 trailed only Nichia in overall production of core LED chips. Meanwhile, Hewlett-Packard Co. placed its high-brightness LED operation into a joint venture with Philips. Called Lumileds, the venture focused on improving white LEDs and was acquired outright by Philips last year.
Gerard Kleisterlee, the Dutch company's chief executive, says Philips's lighting division need only look at other electronic markets to know how varied the future may get. "We were founded around the manufacture of incandescent light, and that vacuum tube produced other vacuum tubes for radios and picture tubes for TVs," Mr. Kleisterlee says. "One by one, they were replaced by solid-state technology." Radio tubes gave way to transistors, and TV tubes to liquid-crystal displays. "Now," he says, "finally that same thing starts to happen to lighting."