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LED Tags to Fall in 2013

Prices for high-brightness light emitting diodes (LEDs) declined by 30 percent or more in 2012, and tags will continue to drop in 2013, although not at the same rate.

“Last year the cost of LEDs fell 35 to 40% and some went down 45%,” says Vrinda Bhandarkar, director of research, LED lighting, for Strategies Unlimited based in Mountain View, Calif. She says oversupply last year is one reason for the price drops. “A lot of capacity was created, especially at the low end of the market.”

The good news for buyers is that prices will continue to decline, "but not as much as last year," says Bhandarkar. She says 35% to 40% price declines "are not sustainable" in the industry, but prices should fall another 10% to 15%.

Bhandarkar said the price for high-end LEDs is around $3.50 per kilolumen for high-end LEDs. Low-end LEDs are about $2 per kilolumen. Kilolumen is a measure of light output.

Suppliers, such as Cree, Osram, Bridgelux and others, have been able to drop prices because of greater efficiencies in the manufacturing of the chips, and because of reduction in the cost of LED packages.

One way manufacturing cost has been reduced is by the use of larger size wafers. Suppliers have transitioned LED production from 2-inch to 4-inch and 6-inch wafers and some are looking to produce LEDs on 8-inch wafers. Larger wafers mean that LED manufacturers can produce more LEDs per wafer and reduce cost.

Lower cost, more uses

As cost drops, LEDS will be used in more applications, including general illumination for homes and businesses.

In fact, declining LED costs in recent years have resulted in LEDs being designed into more electronics equipment, including televisions, computers, automobiles, electronic signs and traffic lights among others. The high-brightness LED market has soared, with revenue rising from $5.1 billion in 2008 to $13.7 billion in 2012, according to LED researcher Strategies Unlimited.

Strong double-digit growth will continue through 2016 when the market will total $20 billion, according to researcher IC Insights.

The global high-brightness light emitting diode market will post strong growth through 2016 as LEDs are used in more electronics systems and for general illumination.

Rob Lineback, senior market research analyst for IC Insights, headquartered in Scottsdale, Ariz., said the LED market will grow 18% in 2012 due in large part to their growing use in electronics equipment.

“Right now the LED market is being driven by backlighting applications in notebook computers, media tablets, televisions and smart phones," he said. LEDs are also used in cars for interior lighting, and more of them are being used in headlamps for automobiles as well.

In fact, the number of cars with LED headlights nearly doubled in 2012, and LED headlight revenue totaled $97 million, according to Strategies Unlimited. LED headlight revenue will grow by 36 percent per year through 2017. The total market for LEDs in the automotive segment will rise from $1.4 billion in 2012, and will grow to $2.1 billion in 2017, the researcher said.

General illumination lights used in homes and businesses will help drive the LED market. “But right now the price of LEDs is too high for most consumers to use in their homes,” said Lineback.

A 2012 U.S. Department of Energy study found that LED lamp costs as measured by dollars per kilolumen were 12 times higher than the cost of a halogen bulb and three times the cost of a dimmable compact fluorescent lamp.

However, the study noted that the price of LED lamps will be more competitive with other lighting technologies on a first-cost basis in the next several years. In addition, the study said that the total lifecycle cost of LEDs is much lower than other lighting because LEDs are more energy efficient and maintenance costs are lower than fluorescent, compact fluorescent, halogen and incandescent.

As an example, the report cited the San Francisco Intercontinental Hotel, which replaced 287 halogen lamps with LEDs. While the LEDs cost five to seven times more than halogens, the hotel recouped the cost in just 1.1 years because of energy savings and lower maintenance costs, the study said.

When the price of LEDs reaches parity with other lighting technologies, they will be more widely used in houses, hotels and other businesses.

Changing substrate

To reduce costs some manufacturers are looking to produce LEDs using a different substrate than sapphire. With many LEDs, gallium nitride (GaN) is layered on a sapphire substrate, although LED maker Cree uses silicon carbide as its substrate.

Televisions and monitors, lighting systems and mobile devices use the most LEDs.

However, sapphire is expensive and some manufacturers are developing LEDs that use silicon rather than sapphire substrates because silicon offers a potential 80% cost reduction over sapphire.

A startup company called Soraa, based in Fremont, Calif., has developed a process that layers gallium nitride on gallium nitride substrates. The company says its GaN on GaN LEDs handle more current and emit 10 times more light per unit area of LED wafer material than LEDs made on sapphire, silicon or silicon carbide.

"But what’s amazing is that we have just scratched the surface in terms of performance gains from our GaN on GaN LED technology," said Mike Krames, chief technology officer for Soraa.

He says “GaN on GaN is the future for LEDs” and the company has developed an intellectual property program and patent portfolio for the technology.

Soraa introduced what it says is the world’s first full-visible-spectrum LED MR16 lamps that produce no UV or IR and last 10 times longer than halogen lamps, which they would replace. It also uses 75% less energy, according to the company.