Bill Watkins, 18 August 2010, Forbes.com
You've likely heard that LED lighting is a good thing. I'd go so far as to say it has the potential to help make history and change the world.
We've been living and working in artificial light for over 130 years, ever since Thomas Edison's first light bulb. But despite the progress that our well-lit society has made, we've paid a significant price--environmentally and financially--for incandescent, fluorescent and other forms of traditional lighting.
An LED (light-emitting diode) is a solid-state semiconductor device that converts electricity into light. It consumes far less energy and has a substantially longer lifespan than traditional lighting.
As energy efficiency becomes increasingly important for controlling costs, improving energy independence and reducing environmental impacts, LED lighting will become the world's leading source of manufactured light.
One of the most compelling aspects of this lighting leadership story is that LED lighting will grow globally using the existing infrastructure. We don't have to invest billions of dollars in new power grids, new wires, new switches or new networks.
The latest research data indicates that a decade from now, nearly half of the commercial lighting business will be owned by LED lighting.
Right now, 20% of the world's electricity is used for lighting; that can be reduced to 4% with LED lighting. And by 2030 LEDs will drive energy savings equivalent to 334 million barrels of oil per year in the U.S. alone.
Let's examine how LEDs will change the future of the lighting market. Here are five illuminating truths:
1. It's a massive $100 billion market that already exists. LEDs are a proven, effective solution implemented in everything from flashlights to flat-panel screens and car headlights. In Los Angeles, where municipal lighting is becoming LED, the city will reduce their annual energy consumption for public lighting by 40%.
And since LED lighting is a semiconductor technology, it will act as a platform to deliver a wide variety of intelligent applications and improved functionality with a wealth of upgrade options for consumers.
One key to breaking the market wide open is hitting the right price points. And the price of LED lighting is rapidly declining. That's when the large, incumbent manufacturers of traditional lighting technology will fall behind in the market.
Recall the dilemma of the wet film industry when digital photography took hold. It lost a tremendous chunk of the market. The incumbent traditional lighting manufacturers face the same dilemma. Every dollar they invest in LED technology steals from their core business. No incremental revenue is gained by the additional development expense.
Alternatively, for up-and-coming LED companies, every dollar invested in technology grows revenue proportionally.
2. The lighting market will increasingly look, feel and operate like the information technology industry. Light bulbs represent the world's last vacuum technology, so digital lighting is where the semiconductor, software and disk-drive industries were 40 years ago--on the edge of steep and continuous growth.
Solid-state digital lighting platforms will provide a wide range of easy-to-use applications with increased and intelligent functionality, like motion sensors, smoke detectors, dimming capabilities and color adaption for starters. You can already run your stereo system through LED lighting, and will even be able to turn your lights on and off remotely using your iPhone.
3. The traditional lighting business fosters long-accepted rules, particularly around innovation. Traditional manufacturers take 16 months to two years to innovate--far too long to bring today's customers the changes they want and need. So startups are breaking the rules, compressing innovation cycles into as little as three months. Speed to market in the sluggish lighting industry is the essence of true value creation.
4. The lighting industry must start to view the world as a commercial whole, creating a global supply chain. By conducting LED research in the U.S. and diversifying manufacturing across the globe, it's possible to be an asset-light company that doesn't invest a lot of precious capital in fixed production costs, resulting in a significant, positive impact on product cost.
5. LED prices will continue to decline until there's a thriving, global mass market.
Last year LED light bulbs cost between $75 and $100. With vertical integration and an asset-light manufacturing model, it's possible to bring products to market faster at a dramatically reduced cost. LED light modules are already available for about $20, the inflection point for the adoption of LED lighting in a commercial environment, with a payback of about two years. At a $10 price point, the payback will be one year and the residential market will explode.
American author James Thurber said there are two kinds of light: The glow that illuminates and the glare that obscures. But there's only one kind of light for me, and that's LEDs.