LEDs and Growth

If you’re not up to speed on LED bulbs, the time to get smart is now. Light-emitting diode bulbs are set to become household words in the U.S. and much of Western Europe – and soon will be in China and other countries – as competition heats up below the $10 (U.S.) price point for 40- and 60-watt equivalent standard lamp bulbs.

The race in many countries to meet the growing interest in LEDs could feature increasingly lower prices as manufacturers active in the U.S. team with retailers such as Home Depot, Staples, Wal-Mart and Ikea to maximize their market share. That’s a game-changing shift in the residential market, which has been slower to take shape than many analysts predicted. The last half of 2013 in the U.S. demonstrates consumers there are waking up to the advantages of LEDs.

With their 20,000-hour +/- rated lifetimes (based on 3 hours per day) and 3+year limited warranties, LEDs can boost household, commercial and industrial energy efficiency helping users save on power bills, make it easier to limit regional power plant emissions and preserve the integrity of power grids. Projected energy savings is 80+ percent, meaning many consumers can recoup their purchase price within 5-10 years compared to traditional incandescent bulbs. This, of course, depends on how much they use them. Commercial and industrial payback periods can be as low as 2-4 years. You can find a quick LED primer here.

The increasing options with LED lighting come as more countries around the world proceed with laws or regulations phasing out the manufacture, importation and / or sale of traditional incandescent and fluorescent bulbs.  Compact fluorescent bulbs (CFLs) have made inroads for the energy they can save. But they’ve also created confusion either because some of them take time to warm up, are not dimmable, give off harsh light, contain mercury and / or cannot be recycled. Not so ‘green’ and convenient after all.

How long will it take LEDs to win the day among most households? Consumers who’ve been relying on incandescents seem to be catching on. Switching from halogen bulbs is a tougher sell due to their lower prices (vs. LEDs) and notable energy savings without the baggage of CFLs.

 

 

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Here is how LEDs are projected to become a bigger share global household lighting sales 2012 - 2021. CREDIT: IHS, Inc.

IHS Inc. research analysts  Stephanie Pruitt and Stewart Shinkwin forecast that sales of LED lamp bulbs (shapes A17 – A21) will grow significantly each year until they are the most shipped technology of those shapes in 2019. They predict global sales of all types of LEDs will grow from about $3.6 billion in 2013 to slightly more than $7 billion in 2016.

Durham, NC-based Cree, Inc. effectively launched a consumer price war over LEDs in the U.S. this past April. With their TV ads leading the way, one competitor after another is responding. Because LEDs have such longer useful lives, each consumer purchase today is one less purchase in the market for a long time. The starting gun has sounded.

After hovering just under $20 for years, one could find Cree’s 40- and 60-watt equivalent bulbs with dimmable “soft white” lighting at Home Depot this month at or close to $5.97. Its 65-watt equivalent, soft white, indoor flood bulbs is almost sure to go drop toward $10. The same seems in store for the company’s just-announced 75-watt equivalent soft white bulb which is due to reach stores in the U.S. in February.  All these prices are without utility rebates.

 

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So many choices: This aisle dedicated to household light bulbs at a Home Depot in northern Virginia is about 100 feet long. CREDIT: Jim Pierobon

At this writing, the race for market share in the U.S. and other countries appears to be primarily between Cree and Philips.  The “Ecosmart” brand assembled in China can often be found close by on store shelves.  Osram Sylvania,  SunSun Lighting, and Switch, are making strides while others are holding back when it comes to competing on price. Analysts said that’s because profit margins for household lighting are so slim – and are likely to get slimmer until sales and manufacturing volumes pick up significantly. Private label offerings by Ikea and Walmart (by GE) stand to get traction as well.

“Nobody expected to see the $10 price point this quickly. It was almost a shock,” said LUX Research analyst Pallavi Madakasira.

Said IHS’ Pruitt and Shinkwin: “This increased competition has led to quicker technological advances and decreasing prices as more companies attempt to become major suppliers of different LED lamp and luminaire technologies. It has also forced the major lamp and luminaire companies to increase their investments in these technologies.”

LED bulbs in various forms and for myriad applications have been available for several years. But price points above $20 for most common household uses had failed to impress consumers. The start of 2014 promises to up the ante in the U.S. as the phase out of standard 40-watt and 60-watt bulbs runs its course.

Carr Lanphier, an equity analyst with Morningstar who follows Cree, said he’s expecting a “downward trajectory” of bulb prices driven not just by competition between Cree and Philips but also by more Chinese manufacturers entering the market which are heavily subsidized by their central  government. Samsung, Toshiba and 3M are expected to become forces in the global market too. Together, they are sure to keep downward pressure on prices as more LED bulbs of different types with different watts show up on store shelves.

Because there are larger homes with more lights and more disposable income to invest for energy savings, the U.S. and Western Europe may be the most lucrative residential playground, for now. But China, with its pressing need to limit harmful emissions by controlling demand, has the most to gain air-quality wise with LEDs, Morningstar’s Lanphier said.

What apparently gives Cree and Philips an edge on the rest of industry, at least for now, is how their bulbs reduce the heat normally generated by light bulbs. The transistor materials and engineering needed to accomplish that amounts to almost one-third the cost of making LEDs, according to Madakasira. Each company has deployed proprietary technology reducing that component to about 10% of its total cost. Other companies either cannot yet or aren’t as willing to make such an investment while margins in the residential market continue to shrink.

Mike Watson, Cree’s Vice President of Product Strategy, said in an email that the tower in its lamp bulbs “acts as both a heat sink and mimics the tungsten filament found in the center (of) traditional incandescent bulbs by lifting the light-emitting diodes to the center of the bulb. By keeping the same form factor, we’re able to save in material and manufacturing costs, which translate to lower costs for consumers.”

Watching Cree’s TV commercials, there’s little doubt that the public company wants to be the leading brand, at least in the U.S. “The campaign is as much for the company as it is for their bulbs,” said Lanphier, of Morningstar.

Cree’s Watson said the response to the campaign has been “enormously successful. It has increased awareness of Cree, increased consideration of Cree bulbs (and) increased advocacy.” Watson asserted that Cree outsells all other LED bulbs combined at Home Depot stores in the U.S. (See typical lighting aisle display in accompanying photo.)

A quick coast-to-coast survey of rebates available in the U.S. indicated rebates are available through many utilities mostly for commercial retrofits and some new commercial construction. A partial list of the types of commercial rebates in the U.S. is here. A link to rebates by utility in the U.S. is here.

Watson said utilities in California, Washington state, Massachusetts, Rhode Island and Arizona are offering rebates on household bulbs with more expected soon.

For you LED diehards out there willing to explore exactly what you get for the price, here’s a list of features to compare different bulbs:

  • Energy used, in watts, with the incandescent watt-equivalent;
  • Lumens (brightness);
  • Color quality equal to natural light, aka “Color Rendering Index” (higher the better, e.g. at least 80);
  • Rated life (hours, typically 22,000 or more);
  • Correlated color temperature (“warm” or “soft” is approximately 2,700 K, for Kelvin; “day light” is approximately 5,000 K);
  • Beam spread: spot or omni-directional;
  • Dimmable.

One distinguishing feature of some LEDs in the U.S. is whether they comply with California’s voluntary light quality standard and whether it is close to the quality of an equivalent incandescent bulb. The Color Rendering Index is a useful measure here.

Another distinction in the U.S. is whether an LED bulb is Energy Star qualified. According to the U.S. Department of Energy, LED lighting products must pass a variety of tests to prove that:

  • Brightness is equal to or greater than existing lighting technologies (incandescent or fluorescent) and light is well distributed over the area lighted by the fixture;
  • Light output remains constant over time, only decreasing towards the end of the rated lifetime (at least 35,000 hours or 12 years based on use of 8 hours per day);
  • Excellent color quality: the shade of white light appears clear and consistent over time;
  • Efficiency is as good as or better than fluorescent lighting;
  • Light comes on instantly when turned on;
  • No flicker when dimmed; and
  • No power draw when the bulb is turned off.

Ah, but comparing most or all of these features online or even in a store will be difficult. Not all manufacturers and retailers promote the same features.  Good luck. Wherever you are, share here what experiences you're having using LED lighting in your home.