Maturing Market Means LED Makers Must Offer More

Marie Freebody, Contributing Editor, marie.freebody@photonics.com

With increasing efficiency, significantly improved thermal cooling and the emergence of low-priced LED solutions, the adoption of this solid-state lighting technology is shifting, and so, too, is the structure of the industry.

Those in the LED industry, whether buyers or sellers, have noticed the consolidation taking place across the market both in Europe and globally. From the recent news that Philips Lighting is selling a majority interest in its combined LED components and automotive lighting business to an investment fund, to the numerous mergers and acquisitions taking place in the Republic of China, all evidence points to a maturing market.

Ambient lighting at the Sejong government complex in South Korea features Samsung’s mid-power ambient or linear LED module package. Courtesy of Samsung Electronics.

So how will the LED landscape shape up in the years to come in terms of technology and applications? Technical experts emphasize the importance of building a diverse product portfolio, while market analysts predict a surge in smart lighting and, of course, more market consolidation. But the question remains – will changes occur at the LED die, device, module or luminaire level?

In 2005, the average efficiency of an LED stood at around 50 lm/W. Today’s commercially available LEDs now regularly top 100 lm/W, and laboratory developments are creeping closer to 200 lm/W.

“Lumen per watt has doubled in the past five years,” said Ulrich vom Bauer, senior manager of product marketing at leading semiconductor manufacturer Infineon Technologies AG of Neubiberg, Germany. “Today 150 lumens per watt is mainstream; 170 lumens per watt can be commercially found. The theoretical maximum is 208 lumens per watt.”

Initial growth of the LED industry came from small display applications, driven forward by the demand for LCD displays. But in 2012, general lighting topped the list of applications for the first time, reaching nearly 39 percent of total revenue of packaged LEDs. Yole Développement, the More-than-Moore market research and strategy consulting company, estimates packaged LEDs reached a market size of $14.5 billion in 2013 and will grow to more than $18 billion by 2020.

New devices must be developed to address several challenges that are facing LED makers. Source: LED Packaging Technology & Market Trends report, September 2014, Yole Développement.

While hopes were high for LED televisions, the sector reached a crisis point in 2011 following a catalog of setbacks, including overestimation of the market, improved quality coming out of China and strong competition from OLED technology.

This is reflected by predictions in Yole’s latest LED report, “LED Packaging Technology & Market Trends” (September 2014 edition); it calculated that the penetration rate for display applications is set to decrease between 2014 and 2020.

Although general lighting is currently taking the lion’s share of today’s market, it is the replacement of existing lighting fixtures that has driven growth. Retrofitting of street lighting and retail spaces, and industrial and office improvements are the largest and strongest growing market for LEDs. In fact, Infineon estimates a demand of over 1 billion retrofit lamps in 2015, increasing to 3 to 4 billion lamps per year. The problem is that, as the market matures, demand won’t be enough to sustain the industry, prompting manufacturers to develop LEDs that can offer more than ever before (Table 1).

A move to modules

“The LED industry environment is becoming increasingly inhospitable. There’s very severe competition among manufacturers, strong price pressure and overcapacity all over the world,” said Pars Mukish, business unit manager, LED/OLED and sapphire, at Yole Développement.

“Consequently, very few LED makers are profitable at a sustainable level. To make things even worse, value is moving to LED-based modules and systems, both for specialized applications and general lighting.”

To withstand and flourish in such a harsh market, manufacturers need to offer customers a wide product spectrum. LED technology is also characterized by forward integration, meaning that single-LED solutions are being replaced by complete LED modules, including part of the driver functionality.

This high-bay application, an apartment building parking lot, features Samsung’s high-power linear LED module package. Courtesy of Samsung Electronics.

Infineon’s CoolDPT Digital Power 2.0 driver and smart drivers for LEDs deliver unique features for the system manufacturer. And at the other end, consumers benefit from features such as down-to-zero dimming, stringent standby consumption that makes connected light more efficient and smart lighting using sensors to enable the system to adapt to environmental lighting conditions.

“We are working on solutions for digital and smart LED drivers which will help our customers, the manufacturers of LED drivers, to differentiate themselves from the competition,” vom Bauer said. “Consumers will profit from features which our products enable. The dimming of an LED light, for example, being still rather problematic as of today, will become smooth over the whole range from 100 percent light output down to zero; the light quality itself will improve to be flicker-free and tolerant against grid voltage variations.”

Smart lighting

As is the trend seen across many consumer products, LEDs of the future will need to offer more than simple light.

The development of smart/intelligent lighting will continue to push LED solutions. Li-Fi is one such example, as highlighted by the UK’s Lighting Industry Association based in Shropshire, which could become an important component in the Internet of Things. This could mean adding features to everyday lighting fixtures such as the humble lamppost, which can be enhanced to aid security, traffic management, communications, retail experience and even data transfer.

Until recently, the LED industry had been driven by a technology push, explains YoungJoo Jin, vice president and head of the strategic marketing team in the LED business division of Samsung Electronics in South Korea. But, Jin said, as the industry matures, market pull is increasing, and more possibilities for diverse applications are being explored. “We think we are on the brink of the ‘true’ LED revolution. Strong technical push and market pull are both absolutely necessary,” Jin said. “LED lighting will bring a whole range of new possibilities to our daily lives by providing extremely high lumens per watt, lumens per dollar and light quality, plus controllability with intelligence that connects it to virtually everything in the world of the [Internet of Things].”

FIGURE====Outdoor lighting in Sejong City, South Korea, was designed using Samsung’s high-power LED outdoor module package. Courtesy of Samsung Electronics.

The design flexibility of LED technology is paving the way for new applications in the future, in the UV, visible and IR wavelengths. For example, Li-Fi uses visible light, as does medical lighting. On the other hand, UV LEDs provide portable disinfection/purification systems, while smart automotive lighting systems utilize IR LEDs.

Top technological advances

According to Yole’s September 2014 LED report, the following LED advances are the ones to watch:

Flip-chip technologies

First developed by manufacturers such as Lumileds and Nichia in a bid to increase lumens-per-watt efficacy and to decrease the cost per lumen, flip-chip (FC) LEDs have started to spread across the industry.

FC LEDs offer efficiency equal to that of vertical LEDs but at a lower cost since no substrate removal is needed. In addition, the short current path decreases forward voltage to lower than that of the traditional Mesa LED, which generates current crowding in the n- and p- layers. Finally, thermal dissipation is better as the heat generated can be dissipated through the metal electrode.

Chip-scale package

Mixing FC technology with historic evolutions in the semiconductor industry has led to the emergence of the chip-scale package. Such packages offer high lumens per dollar, thanks to a package-free structure with no plastic mold, high lumens per watt (in an FC-based platform) and tight color control, as the phosphor film can be directly attached to the flip-chip surface.

LED filament lamp

Expanding on chip-on-board LEDs has led some manufacturers to develop a new type of package known as LED filaments. LED filaments feature chip-scale chip-on-board-type packages that mimic a traditional incandescent filament.

Here, low-power LED chips are assembled directly onto a transparent substrate and coated with phosphors to offer high power at a low cost.

Flexible LED strips

Flexible LED strips are a new type of LED-based module that has enjoyed commercialization over the past two years. Although these products have not been developed with the direct objective to decrease cost or increase efficacy, they are featured more and more on the international market, offering plug-and-play linear lighting solutions for direct or indirect lighting.

The Consolidation Trend

It may have started in Taiwan and China, but mergers, acquisitions and consolidations are now changing the face of the European LED landscape. In July 2014, Philips announced that it intended to combine its Lumileds LED component and automotive lighting businesses into a stand-alone company within the Philips group. Fast forward to March 2015, and Philips Lighting agreed to sell 80 percent of this company to a consortium led by GO Scale Capital.

This leaves the company free to focus on more profitable activities such as producing luminaires, complex lighting systems and smart lighting. “It is also a way to offer more opportunities for Lumileds to grow in a highly competitive industry, independently from the giant parent company,” Yole’s Mukish said. “In this regard, Philips is following the example of Osram, which has shown strong performance since it split from parent company Siemens.”

According to the Wall Street Journal, the revenues Philips earned from Lumileds and automotive lighting reached US$1.9 billion in 2013, 17 percent of Philips’ total lighting sales.