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The Market Outlook for High-Brightness LEDs in Lighting Applications

International Workshop on Status, Prospects, and Strategies for LEDs in General Lighting

May 3-4, 2007

Robert V. SteeleStrategies Unlimited

22

Outline

IntroductionHB LED MarketsLightingOutlook

33

HB LED Market AnalysisMarket is worldwide in scope

Main production and consumption are in U.S., Europe, Japan, Taiwan, S. Korea, China, SE Asia

Market analyzed in terms of packaged devices (lamps, SMDs, multichip, high-power packages)Materials include InGaAlP (red-orange-yellow) and InGaN (blue, blue-green, green, white)

Higher performance, “qualified” devices

Market segmented and sub-segmented by applications that have similar functionality

HB LED Application SegmentsMobile AppliancesOther

Indicators, small displaysamusement, misc. other

Illumination

44

HB LEDMarket Signs and Displays

Automotive

Signals

55

Outline

IntroductionHB LED MarketsApplicationsLightingOutlook

66

HB LED Market Trends

Market continued its “slow growth” phase in 2006 – similar patterns to 2005Overall market growth was 6% to $4.2 billionHeavily influenced by ongoing decline in mobile phone marketOther applications continued to have attractive growth rates Substantial ASP erosion across many product types

77

Recent Market History

0

1,000

2,000

3,000

4,000

5,000

2001 2002 2003 2004 2005 2006

Other

Illumination

Signals

Automotive

Signs/Displays

Mobile Appliances

MarketSize

($ Million) 44%/yr

6.2%/yr

88

Market Growth Without Mobile Phones

0

500

1,000

1,500

2,000

2,500

2001 2002 2003 2004 2005 2006

Market Size ($ Million)

Other

Illumination

Signals

Automotive

Signs/Displays

Other Mobile

22%/yr

99

2006 Market by Application

Mobile Appliances

48%

Automotive15%

Signals2%

Illumination5%

Other16%

Signs/Displays

14%

Total: $4.2 Billion

(down from 57%

in 2004)

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2006 Market by ColorInGaAlP

ROY17%

InGaN Blue/Green

28%

RGB Multichip

7%

InGaN White

48%

Total: $4.2 Billion

1111

HB LED Units and ASPs

0

5

10

15

20

25

30

35

2004 2005 2006

Unit

Shipments

(Billion)

0.00

0.05

0.10

0.15

0.20

0.25

ASP

($)

Units

ASP

29%/yr

-18%/yr

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Outline

IntroductionHB LED MarketsLightingOutlook

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Solid-State Lighting MarketThe use of HB LEDs for lighting is currently the fastest growing applicationThe market is highly fragmented, encompassing many niche applications

The majority of applications are for colored (R,G,B) lightGeneral illumination applications are starting to emerge

Hundreds of companies worldwide are participating at the luminaire or fixture level

Strategies Unlimited has identified and described approximately 300 such companies, but there are moreParticipants range from start-ups to the world’s largest lighting companies

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HB LED Lighting Market

The 2006 market for HB LEDs used in lighting was $205 million

Architectural is the largest

Growing at around 37% per year – the highest of any HB LED applicationProjected to reach ~$1 billion in 2011Majority of applications use RGB today, but white will increase to more than 60% of the market by 2011

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Status of SSL Fixture IndustryMany small companies dedicated to SSL; high level of LED expertiseMany large and medium lighting companies, with some interest in SSL, offer a few products

Most lack in-house LED expertiseRely on outside consultants for design, prototyping

Volumes are small and costs are high, independent of high cost of LEDsProducts in the market are highly variable in terms of quality

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SSL Market DevelopmentMost product and market development is being carried out by small, specialized companies

With a few exceptions (e.g., Philips Lighting, Zumtobel)

Generally, large lighting fixture company interest is modest (but interest is growing)

In-house LED expertise is minimalEuropean companies moving faster than U.S.

Established lighting companies control the access to large-volume sales and distribution channels and customers

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SSL Market DriversVisual appeal

Saturated colors, nearly point source of light, design flexibility

Long lifetime, robustApplications with high maintenance costs

Compact form factorLack of radiated heat or UVLow-voltage operationEnergy efficiency

Colors, low wattage applications (e.g., battery and solar-powered), low-temperature operationImproving rapidly

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10 Significant Near-Medium-Term Applications

ArchitecturalChannel letter/contour lightingConsumer portable (e.g., flashlights)ResidentialMachine vision

Retail displayEntertainmentSafety/securityOutdoor areaOff-grid (generally solar-powered)

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Interesting Emerging General (White) Lighting Applications

ResidentialPermlightLED Lighting Fixtures (LLF)LemnisProgressRenaissanceBruck

Retail DisplayLumination (GELcore)StylmarkOptoLumMAG-LEDNuaLighti-LeDColor KineticsBartcoMatsushita Electric WorksPhilips

2020

Retail Display LightingWhite LEDs are being used to provide attributes that are advantageous for certain types of products:High-end retail (e.g., designer label branded stores)

“High-tech” look; interesting effects; design flexibilityCosmetics

Lack of radiated heat from sourceJewelry

Sparkling appearance from point light source; compact; low heat;long life

Refrigerated display casesMore efficient than linear fluorescents at low temperatures; rapid start-up; long lifetime

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Retail Display Lighting Examples

Source: NuaLight

Source: Hera GmbH

Source: MAG-LED

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LED Residential Lighting

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Refrigerated Display Case Success Story

Wal-Mart adoption of LED refrigerated display case lighting from GELcore was the SSL “story of the year”Installing in all new Sam’s Club and SuperStores from Dec. 2006, ~300 per year in U.S.

Part of Wal-Mart’s “green” strategy

Drivers are energy and maintenance savingsCan use occupancy sensors to turn off lighting during low traffic periods (impossible with fluorescent due to slow start-up)

Other supermarket chains are likely to follow Wal-Mart’s lead

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Linear Fluorescent vs. White LED Relative Efficiency

0%

20%

40%

60%

80%

100%

0 10 20 30 40 50 60 70 80 90

Ambient Temperature, Deg. F

Relative Efficiency

Fluorescent

LED

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Opportunities for SSLOffer a unique lighting solutionCreate an aesthetically pleasing lighting environmentDeliver value (on a cost-of-ownership basis)Provide lighting products adapted to unique physical environmentsSave energy; comply with regulatory requirements (e.g., Title 24 in California)

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Challenges for SSLHigh initial costOther alternatives for energy efficiencyConsistency of color/binning issuesNeed to provide a complete lighting solution with ease of installationAdapt to standard electrical interfaces and controlsRealistic claims of performanceDevelopment of standardsNeed widespread base of lighting fixture designers and engineers who understand LEDsNeed for high-efficiency light engine/fixture design

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Essential Design Principles for LED Light Engines

1. Don’t waste photons

2. Don’t waste electrons

3. Be cool

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ExamplesEfficient DesignStart with 70 lm/W 1-W white LEDs (at 25 °C junction temperature)Assume: 90% electrical efficiency; 90% optical efficiency; operate at 65 °Cjunction temperature

Light engine efficacy = 70 x 0.9 x 0.9 x 0.85 = 48 lm/W

Inefficient DesignStart with 70 lm/W 1-W white LEDs (at 25 °C junction temperature)Assume: 80% electrical efficiency; 80% optical efficiency; operate at 100 °C junction temperature

Light engine efficacy = 70 x 0.8 x 0.8 x 0.75 = 34 lm/W

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Outline

IntroductionHB LED MarketsLightingOutlook

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LED Lighting Market OutlookNiche lighting applications will continue to growGeneral illumination (e.g., white light applications) will become increasingly importantPresumes continuing improvement in white LED price/performance

And luminaire performance!

Presumes substantial marketing efforts to penetrate the conventional lighting market

Penetration will proceed gradually – application by application

Overall forecast 37% CAGR to ~$1 billion in 2011

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LED Lighting Market Forecast

0

200

400

600

800

1000

1200

2006 2007 2008 2009 2010 2011

Market Size ($ Million)

White

RGB

3232

LED Lighting Market Evolution

0.01

0.1

1

10

100

2000 2005 2010 2015 2020

Market Size($ Billion)

Total "Lamp"MarketLED Lighting

Niche Applications

BroaderAdoption General

Illumination

3333

Thank you!