London is on the big stage for LEDs this year, with showcases for architectural, signage and other verticals having a chance in the world's spotlight. The most notable new LED "poster child" is London's Tower Bridge which was recently refitted with 6,500 feet of LED linear lights from GE, as reported and photographed here. Beyond saving London 45% in energy costs for illuminating this landmark, LED versatility and design is being fronted with first having shone a "diamond white" during Queen Elizabeth's Diamond Jubilee celebration on the Themes, and now, next week, we will see the traditional colors and patterns of the Olympics and Paralympics, according to the same article.Granted, this is the news that really helps to promote LED awareness to the general public, but the positive tipping point for LEDs is not the architectural and grand stage opportunities, rather, it is pricing, as we discussed after LightFair. Over the next few years, according to a recent study by Lux Research, LED chip packages will experience a 70%+ cost reduction which will lead to a halving of the retail cost of an LED bulb by 2020, as reported by SolidState Technology (SST).
Positive new pricing lows
According to TrendForce's LED pricing survey, the current cost of a 40W equivalent LED bulb in the US dropped in June 2012 to a new low, dipping to roughly US $10, and a similar drop in price to US $20 for the 60W equivalent LED bulb. Not only are these price drops a result of the cost reductions for components and Balance of System (BoS), but also due to the increased competition in the market as more companies are being attracted to the high growth vertical of LEDs. After a period of increased feature offerings which raised the price of many end-products, the recent period saw a reverse of this trend which allowed prices to stabilize and continue downward. The downward ASP pattern is needed to encourage continued LED adoption in the wider market. This positive trending is underscored by LEDinside:
[...] the global LED light bulb market is back on the right track: the focus shifts from the price competition to the pursuit of better price/performance ratio. It is estimated that after the transition period, LED light bulb market may enter the mature stage as products of high price/performance ratio become more popular and the prices become more consumer friendly.
Strategies Unlimited's recent LED report, also reviewed by SST, is similarly positive on the cost reductions possible in LED manufacturing that will contribute to continued rises in adoption as end-product prices fall and competition grows:
Between 2010 and 2011, LED prices declined by more than 25%; for some suppliers the decline was more than 40%. The decline in prices stimulated demand for LED lighting products, increasing overall revenue by 46.3%. LED suppliers diverted excess manufacturing capacity to produce LEDs for the lighting industry, picking up the slack from the slower-than-expected display backlighting sector.
LED prices will continue to decline 2012-2016 at a 13% compound annual growth rate (CAGR). In the same period, CAGR for revenues for LEDs in lighting is forecast to grow 10%.
As we see in the poster example of London's Tower Bridge, the LED market is still seeing primary adoption from larger installations, but with the forecasted price declines, the retail market adoption rates will quickly follow, increasing both revenue and overall market penetration rates. With consumers likely most interested in dimmable LEDs for lighting control and all users interested in the ability to manage power draw through dimming. Dimming allows for further trimming of energy consumption which will help the LED adoption rate. As LEDs continue to be more widely adopted, we see the related improved forecasts for the LED driver market in semi, as well as the overall LED BoS component market.