One of the main conclusions is that the LED industry is entering its third growth cycle: general lighting. Growth of the LED industry has come initially from the small display application and has been driven forward by the LCD display application. LED TV was expected to be the LED industry driver for 2011 but the reality was quite different… Lower adoption of LEDs in the TV market and the entry of several new players, mostly from Asia, created a climate of overcapacity, price pressure and strong competition. As a consequence, packaged LED volume was about 30% lower than expected and revenue shrank due to strong ASP pressure.
“In 2012, most companies have moved to the new “El Dorado” of LED business: general lighting, which represents the next killer application for LEDs. But enabling massive adoption of the technology for such an application still requires a large decrease in the cost of LED-based products…,” explains Pars Mukish, Market and Technology Analyst, LED at Yole Développement.
Yole Développement and EPIC estimate packaged LED revenue will reach a market size of $11.4B in 2012 and will peak to $17.1B by 2018. Growth will be driven both by the display (LCD TV) and general lighting applications until massive adoption of LEDs in lighting. From 2014, the third growth cycle of the LED business will accelerate with the general lighting application representing more than 50% of the overall packaged LED business. In terms of volume, LED die surface will increase from 22.5B mm² (2012) to 80B mm² (2018). This will prompt substrate volume growth from 8M x 2” equivalent (TIE) in 2011 to 39.5M x 2” equivalent in 2018 with a CAGR of 26%.
Yole Développement & EPIC analysis presents all applications of LEDs and associated market metrics within the period 2008-2020, detailing for each application: drivers & challenges, associated volume and market size (packaged LED, LED die surface), penetration rate of LEDs…
The cost of packaged LEDs still needs to be reduced by a factor x10 to enable massive adoption in general lighting.
The technology and manufacture need to improve to drive performance and cost reductions for LED solutions to reach a trigger point where massive adoption could start. Industry consensus points out a cost reduction per lumen of packaged LEDs by a factor x10. This can be achieved through a combination of manufacturing efficiency and performance improvement, such as access to larger size wafers, lower LED epitaxy cost of ownership through better yield and throughput, improved packaging technologies (phosphors, optics…) and improved package and luminaire design (for cost reduction through “design for manufacturability”).
China’s GaN MOCVD reactor capacity has increased by a factor x20 the last 3 years
The capacity for GaN LED epitaxy has increased dramatically in 2010 and 2011. This increase took place across all regions but was most dramatic in China (increased by a factor x20 of the reactor capacity between Q4 2009 and Q1 2012).
“Most emerging Chinese LED epiwafer and die manufacturers are still lagging significantly behind their competitors in term of technology maturity and LED performance,” says Dr Eric Virey, Senior Analyst, LED at Yole Développement.
The bulk of those new companies are not yet capable of manufacturing LEDs to address the large display and general lighting applications that are currently driving the market. In the mid-term, consolidation of the Chinese LED industry will occur (scenario in the central government’s new five-year plan), and China should become a major actor in the LED industry.
Ultimately, the long life of Solid State Lighting (SSL) technology will totally change the lighting market by dramatically increasing the length of the replacement cycles. The replacement market (aftermarket) will be strongly impacted, pushing traditional players of the lighting industry to define new strategies to capture profit (intelligent lighting, lighting solutions…).
“In addition, as value is moving to the top of the value chain (module and luminaire levels), several players that were originally involved only at LED device levels will develop strategies of vertical integration in order to capture more value,” added Tom Pearsall, General Secretary, EPIC.
But accessing distribution channels represents a big challenge for those players who develop new approaches to sell their lighting products (e-commerce, new distributors….). The rise of LED lighting will therefore depend on the right merger of the emerging LED industry with the traditional lighting industry.
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