This article was published in the November/December 2012 issue of LEDs Magazine.
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Since its inception, Strategies in Light (SIL) Europe has focused on the issues affecting the region’s LED lighting industry, looking both at the transformation of the market and also the key technology issues. This year, SIL Europe took place in mid-September in Munich, Germany, and the conference was split into two parallel tracks on market transformation and technology. The opening day featured well-attended workshops on European standards for LED lighting, and the biological aspects of light, as well as the Solid-State Lighting (SSL) Investor Forum (see sidebar at the bottom of the page ). A selection of photos from Strategies in Light Europe can be viewed on our website.
Vrinda Bhandarkar, a research analyst with Strategies Unlimited, opened the Keynote session of the conference with an overview of the LED and lighting markets. The year-on-year growth in the global market for LED packages has fallen by an order of magnitude in each of the last two years: the market grew by 108% in 2010 and by 11.3% in 2011, and Bhandarkar predicted that 2012’s figure would be 1.5%. This would put the total LED revenue at $12.7 billion in 2012. Unit sales have of course grown far more rapidly in percentage terms, but this has been offset by a rapid decline in the price of both LED chips and packages. One factor has been the over-capacity of mid- and low-power LEDs, particularly among Korean and Taiwanese manufacturers. These devices were intended for use in the TV and display market, but are now increasingly being used for ambient lighting applications, said Bhandarkar. Prices for 4000K white LEDs are, on average, likely to drop below $4/kilolumen (equivalent to 250 lm/$) by the end of 2012, she said, with 2700K LEDs being about twice as expensive.
A number of speakers said that the lm/$ metric is rapidly becoming more important than lm/W, which has dominated technological progress in the last decade. Manuel Zarauza of LED supplier Seoul Semiconductor said that OEMs are already talking about figures as high as 2000 lm/$ (as well as 180 lm/W) by 2015.
Switching to the LED lighting products themselves, Bhandarkar said that the combined market for LED lamps and luminaires will grow at a CAGR of 17% from 2011 to 2016. Luminaires will grow at 19%, while the replacement-lamp market will grow at 11% and will saturate after 2014 at just over $4 billion per year.
Looking at the big picture, Bhandarkar said that commoditization is inevitable, partly as a result of government incentives and rebates. These encourage large-scale adoption, leading to commoditization and ultimately delivering the substantial energy savings that provide payback for those incentives. The industry is heading for a substantial shake-up, said Bhandarkar. “Consolidation to increase scale is inevitable,” she said. Also, the industry will take advantage of control systems to achieve greater energy-efficiency savings, although customized lighting design will also be required to make this happen.
Many speakers at SIL Europe focused on the transformation of the lighting industry. For example, Guido van Tartwijk of Philips talked about a three-phase transformation of the lamp market. Race 1 is to create “true replacements” for different lamp types that meet certain “good enough points” in terms of lumen output and efficacy (in lm/W). Race 2 is “aggressive cost down” to achieve “consumer-acceptable price points in a sustainable way.” This helps to build shipment volumes and reduce payback times. Race 3 is to add features, such as intelligence and networking, which lead to “new experiences” for the end user. Another speaker from Philips, Annetta Kelso, spoke about the market transformation of the European lighting industry, as described in detail on page 43.
The third wave is in “smart lighting”, using cost-effective integration of controls and intuitive user interfaces. “The third wave will be enabled by IC makers that can integrate complex functions,” said Schlejen. He added that many of today’s “stupid” professional lighting installations can be converted using “smart retrofits” that will enhance energy savings, safety and comfort. Schlejen concluded that the industry is buoyant, but some companies will need to be careful in their approach. Continuing with his wave theme, he advised: “Surf’s up. But don’t lose your pants.”
An industry in flux
Christian Schraft of Osram AG characterized the traditional lighting market as being split into two distinct segments: lamps and fixtures. The former was global, standardized, and based on the demand created by replacement. There were a small number of leading suppliers, in what William Mackie of Berenberg Bank referred to as a “comfortable oligopoly.” The traditional fixtures market could be characterized, said Schraft, as application-specific and regional, with small-batch production. The introduction of LEDs created a “lifetime light source” that will ultimately eliminate the replacement business, said Schraft. Integrated LED luminaires are another unprecedented feature of the evolving lighting industry.
|Demographic change||More people, more elderly|
|Electrification||More grids||Volume based|
|Emerging market shift||More income|
|Energy efficiency||More-efficient lamps|
|De-carbonization||More bans/restrictions||Value based|
|Emotionalization of light||Light used for special events and setting the mood||Quality of life|
Table l. A variety of driving forces are shaping the future of the global lighting market. (Source: Christian Schraft, Osram AG)
Changes in the market also impact how lighting companies operate. Previously, companies supplied either lamps or fixtures (with Philips as a notable exception) but now “the boundaries are blurred,” said Schraft. Osram already operates at many different points on the value chain, ranging from its LED-making subsidiary Osram Opto Semiconductors to recently-acquired fixture and system suppliers Siteco and Traxon. Overall, Osram AG generated about 25% of its revenue in fiscal 2011 from SSL, said Schraft.
Of course, another impact of the inroads made by SSL is the emergence of smaller companies specializing in SSL technology. Berenberg’s Mackie commented that, while industry leaders are having to “manage legacy and build bridges to the future,” at the same time “fragmentation and technology creates opportunities for new entrants.”
Schraft characterized the changes in the lighting industry as involving a transition to higher-value LED-based products and applications, and a transformation to intelligent networked solutions and value-added services. The drivers of change are summarized in Table 1.
Schraft contrasted the replacement of older lighting technologies with the way in which the TV industry has eliminated CRTs, and digital cameras have effectively eliminated film. However, lighting is different, said Schraft: although the market value of traditional (non-SSL) lighting peaked in 2011 it will still account for a third of the market in 2020. “The installed base will have a long life, or ‘golden tail’,” he said, and there will be coexistence of different technologies for many years to come.
Ecodesign regulations and labeling
Jan Denneman, chairman of the Global Lighting Association (GLA), made the point that companies alone cannot set standards or influence regulations. This is where organizations such as the GLA and the European Lamp Companies Federation (ELC) come in. One of the people that the ELC might seek to influence with regard to European regulations is András Tóth of the Energy Efficiency unit of the Directorate-General (DG) for Energy at the European Commission (EC). At SIL Europe, Tóth provided an update on the new Ecodesign and Energy Labelling regulations that should come into effect in September 2013. These and other European regulations, projects and funding schemes were discussed a recent LEDs Magazine article.
The Energy Labeling regulation (874/2012) has been adopted by the EC, and in the week following SIL Europe it was published in the OJ (Official Journal of the European Union). It will become directly applicable in all EU Member States from September 1, 2013. The same start date is planned for the new Ecodesign regulation, but this is currently within a scrutiny period (see Table 2).
The revised version of the energy label for lamps has new A+ and A++ classes, which are specifically designed to allow LEDs to demonstrate their capabilities. The label (or package) must also display a value for energy consumption in units of kWh per 1000 hours. The class is determined by the value of the energy-efficiency index (EEI), with different values applying to non-directional and directional lamps. The EEI is the ratio of the power corrected for any control-gear losses compared with the reference power. The latter is obtained from the useful luminous flux; this is the total flux for non-directional lamps, or the flux in a 90° or 120° cone for directional lamps.
Luminaires are also included in the new regulation, but there is no separate labeling requirement for LED modules that are integrated into luminaires. Replaceable modules will require a label.
|Commission adoption – July 12, 2012 Regulation no. 874/201||Regulatory Committee (EU Member State experts) vote – July 13, 2012|
|European Parliament/Council right of objection (ended Sept 2012)||European Parliament/Council right of scrutiny (until Nov 21, 2012)|
|Published in the OJ*, volume L258 (Sept 26, 2012)||Commission adoption and publication in the OJ* (expected date: end 2012)|
|Directly applicable in all Member States – from September 1, 2013|
Table 2. Update on two forthcoming EU regulations related to lamps and luminaires. Source: András Tóth, European Commission. *OJ = Official Journal of the European Union.
EC projects and research
The EC’s Michael Ziegler, representing the Photonics Unit of DG Connect, spoke about the outcomes from the consultation on the Green Paper on SSL, as previously discussed in LEDs Magazine (www.ledsmagazine.com/features/9/9/3). Ziegler said that two lead markets have been identified to accelerate SSL uptake, namely cities and buildings. In March 2012, the EC established the Task Force on SSL for Cities, with a goal to provide guidelines for SSL deployment in municipalities. The effort will run through to the end of this year.
Ziegler also discussed the EC’s cohesion policy that will encourage “smart specialization” and help nations or regions to focus on particular areas of technology. This policy could include funding for key enabling technologies, such as setting up pilot lines for SSL – but this would most likely be for OLEDs rather than LEDs.
Michel Quicheron gave an overview of the SSL-related activities conducted by the EC’s Joint Research Centre (JRC). He covered a report on public procurement, which concluded that lighting is often not among priority product groups for such activities. This is due in part to the lack of standards, the wide variety of specifications in the market, and the rapid development of the technology. “Public procurement has high potential for bringing more LEDs to the market, but public buyers remain cautious towards this technology,” said Quicheron.
An ever-increasing number of standards and regulations are being put in place to control the performance of SSL products reaching the European market. However, authorities usually lack the money and resources to enforce the rules. Otmar Franz of the ELC said that market surveillance is necessary to ensure a level playing field. “Highest-quality, conforming products have their price,” he said. “Non-conforming products have lower product-development costs and lower manufacturing costs, which leads to price pressure.”
Franz described some of the activities being carried out by different EU Member States, and said: “The ELC supports [these activities], but the action from different governments is not focused enough.” Because of this, the ELC has decided to take complementary action by starting a dedicated market-surveillance project in the EU. This will keep track of market-available products – initially the activity will focus just on lamps – and will initiate third-party measurements where necessary. Non-compliant products will be flagged up to the relevant authorities for action.
Franz was keen to emphasize that all market participants – including ELC members – would be treated equally. “The European market is an open and mature market for all participants wherever they may come from,” he said, “but…play to the rules!”
Airport and office lighting
Several speakers discussed the use of LEDs in different lighting scenarios. Alexander Hanrath of Nualight, a Ireland-based LED lighting supplier, described a lighting project at Schiphol airport in Amsterdam. This massive complex has more than 85,000 fixtures, and the maintenance cost for replacing a single lamp is in the EUR 25-100 ($32-$129) range. Nualight’s Lumoluce subsidiary replaced fluorescent fixtures with linear LED lights that were fitted with the proprietary Wave system. This uses motion-based dimming, enabled by custom-designed passive-infrared (PIR) detectors and dimming drivers.
Andreas Cereghetti of Switzerland-based Regent Lighting compared office lighting using three different approaches: linear lighting (pendant, surface or recessed), recessed planar lighting, or freestanding uplighters. The latter approach, developed by Regent (Fig. 5), has advantages such as flexibility and individual control of each fixture. Installation and networking are also straightforward.
Regent performed a case study in an open office with 22 uplighters, each with presence detection, daylight sensors, buttons to set the dimming level and to switch on/off individually, and ambient brightness control. This latter feature prevents a situation when one luminaire is lit and the rest of the office is in darkness. Instead, the nearby uplighters are also illuminated at a low level, enabled by a wireless communication network. This improves well-being and comfort, and reduces fatigue due to excessive background contrast levels, said Cereghetti.
The case study showed that overall power consumption was considerably lower than estimated, partly because of the ambient brightness control, partly because desk occupancy was lower than predicted, and partly because of the influence of large windows and daylight sensing.
Biological dimensions of LED lighting
As well as visual effects such as imaging and motion perception, light also conveys non-visual effects such as controlling the body’s circadian rhythm, alertness and well-being. Andreas Wojtysiak of Osram AG described different sets of receptors in the eye, which are either visual receptors (rods and cones) or biological receptors (ipRGCs). These ipRGCs are responsible for, among other things, day/night detection to control the body’s inner clock. The ipRGCs are located in the lower part of the retina and are stimulated most effectively by wide-area light sources from above – in nature, of course, this means the sky. Wojtysiak said that broad-area ceiling lights would do a much better job of boosting the alertness of the conference audience, rather than the spotlights that were in use in the auditorium.
Fenella Frost of PhotonStar LED extended this discussion by emphasizing that blue light at around 460 nm is the critical wavelength that controls biological effects. “Blue light suppresses melatonin production and promotes wakefulness,” said Frost. Thus, it can be beneficial in the morning to have a light source with a high blue content (such as a cool-white LED source), but in the evening this source can disrupt the natural cycle and make sleep difficult. The latter effect is seen when people use LCD screens late into the night, and are affected by the blue-light content of the backlights.
In contrast, correlated color temperature (CCT) on its own has limited biological effect, although people often select cool-white light in the morning to boost alertness, and warm-white light in the evening to help with relaxation. However, explained Frost, if this warm-white source is LED-based, it may still have a high blue-light content, which is not conducive to sleep. The solution could be a variable LED source that can be adjusted to produce warm-white light with a low-level blue component, for evening use.
This year’s Solid-State Lighting Investor Forum included presentations from a number of private companies looking for investment, as well as input from experts from the financial sector. Will Mackie of Berenberg Bank discussed issues faced by non-experts when looking to invest in the lighting market. “Investors are concerned with available returns in a changing environment,” he said. The introduction of LED technology has disrupted the lighting industry’s value chain in a number of ways. For example, there is a general compression of product lifecycles, along with higher levels of R&D spending, concerns about capital expenditures, and the need to focus on supply-chain management to deal with rapid obsolescence of new products as LED technology continues to evolve and improve.
The issue of shorter lifecycles represents one of five “key investor concerns” highlighted by Mackie. Another is margin compression, as a result of high R&D spending and a lack of economies of scale, which will only be resolved when true high-volume markets emerge. Also, LED chips and packages are becoming commoditized, with an increasing focus on lm/$ (rather than lm/W). The potential for profit is more uncertain as this part of the market shifts towards a more competitive, higher-volume situation.
Mackie also highlighted concerns over the long-term decline in the lamps business, although a healthy market will be enjoyed in the next few years. The final investor concern relates to the shift in value to luminaires and solutions, which in turn requires higher selling expenses and more individualization. “Greater application knowledge and the ability to integrate a range of products and technologies will be key,” said Mackie.
Jörg Sperling of WHEB Partners gave a cleantech investor’s view of LED lighting. He said that venture capitalists (VCs) look for “disruptive technology, sustainable differentiation, and attractive valuations” and described SSL as a “VC-ready field.” Suitable companies may not offer light-emitting products or components, but could instead offer new, enabling, ancillary technologies.
Since systems are becoming increasingly important due to LED commoditization, VCs will be looking at areas such as intelligent LED controls and smart-grid integration as potential “hot topics” for investment, said Sperling.
While WHEB looks for companies that are already profitable with $5-10 million in revenue, Arch Ventures funds very-early-stage companies. Arch’s Paul Thurk gave a US-based VC’s view of the European SSL market, and said that there is “absolutely a gap in early-stage funding” in Europe. “Establishing a tighter SSL community would help start-ups,” said Thurk, describing the success of the DOE program in the US. The funding level is not enormous, at around $114 million in total since inception, but the program has had a huge community-building effect. “Europe could really use an equivalent,” said Thurk.
Money is tight in Europe, and many SSL efforts are under-resourced, said Thurk. It takes a certain level of funding to prove that the idea will work, but this is essential so that the company can compete and stay ahead on IP. Most start-ups in the US receive some form of non-dilutive funding from different government agencies, said Thurk. However, the system in Europe to gain FP7 funding from the EC requires partnering with organizations from other countries, which can bring its own set of problems.