China leads on general lighting
While the market for general lighting will never be as heavily Asia focused as the backlighting market, China is still comfortably the largest country for LED sales in general lighting. I’ve spoken to several of the leading packaged LED suppliers about this recently, and they all agree on this. IMS assessed the total worldwide market size for packaged LEDs in lighting to be $0.9 billion in 2009 and $1.4 billion in 2010. We project that this will reach $2.1 billion in 2011. China has the largest share of this. Most LED bulbs sold in the west are being produced in the east, with China definitely the country that has the largest volume for Western markets. China is also the world leader on LED outdoor lighting, although this is largely due to state subsidies and promotion that are giving the industry a boost in this fast developing economy. On April 28, 2009, Chinese Ministry of Science and Technology officially designated 21 Chinese cities to carry out a “Million Lights” program, reached over 200,000 LED street lamps installed that year and this number grew further in 2010.
Although the market size for LED lighting in China does maintain a clear lead over other countries, it is not totally dominant, with light bulbs for residential applications actually being most successful in Japan and street lighting projects also common in Europe and Americas, and elsewhere. However outside of China many of these outdoor lighting projects are very small volume and often essentially test runs for larger projects. China has maintained its lead in LED general lighting despite a slow down in recent months due to both the introduction of new specifications and also due to over ordering and supply chain issues, as noted by Cree in recent earnings calls. However despite sluggish growth in recent months stronger growth is expected again at some point in 2011. China will continue to offer the largest volume in the short and medium term.
The opportunity for LEDs in general lighting will be slower than the booms in mobile and later notebooks and TVs, due to the longer product lifetimes. However this also means that this larger market will enjoy steadier growth over a longer period. Residential (which currently only has a significant market in Japan), outdoor street and parking lights, retail and hospitality are the main focus areas and have the largest volume. Other areas, such as flash lights and stage lighting, are more mature but at the same time more niche. Office and industrial also have a large available market for the future, although at the moment these market are not really there in terms of big volume. In industrial, the efficiency and dollars per lumen is not sufficient yet for LED. Other issues that have been cited include the difficult environment (heat, dust etc) and the long product lifecycles in this application. In office environments, LEDs compete with linear fluorescent tubes and offer comparable fixture efficiency (i.e. once power and optical losses have been considered). However both light distribution and cost are still areas of deficiency relative to fluorescent in this application.
Most of the volume in the China market is currently won by big suppliers from abroad. Cree make no secret that this is a strong market for them, and it is believed that their main competitors there are other traditional top tier suppliers such as Lumileds, Nichia and Osram. These companies currently have the reputation of having the highest quality product for general lighting applications. However with government subsidies for new reactors encouraging Chinese suppliers to enter the market or grow existing businesses, many industry watchers are interested to see whether this situation will change. At the moment, it is difficult to see a clear consensus on this, at least for the long term. In the short term companies such as Cree and others can be expected to maintain a technology and quality lead as Chinese suppliers bring reactors on line and try to develop more mature and efficient technology.
The quality requirements are quite severe today which makes it difficult for local suppliers to participate. LED luminaires must meet requirements including the authorisation certificate of a top manufacturer, illumination, uniformity, accepted depreciation levels, high efficiency, protection from the elements, long life span, good thermal management system, specified colour temperatures, specified minimum CRI, and others. However, with China subsidizing its own domestic LED manufacturing base, if these requirements were to be relaxed in the future it could significantly impact the leading players as the Chinese manufacturers could have a cost advantage resulting from the MOCVD subsidies if they can be competitive in several years on areas such as yields and device performance.