A lot of talk has been made about LED lighting in the last 3 years. The potential of LED lights is clear to see in terms of energy consumption and heat displacement, but the price points of new LED lights can make even the biggest environmentalist cringe. With advancements in LED technology and increases in production, LED’s are soon to be a mainstream lighting source.
At current prices an LED equivalent 60 watt bulb costs around $40. That’s a lot for a light bulb, especially when consumers are used to paying around a $1 for a bulb. The U.S. Department of Energy foresees the cost of LED’s bulbs to drop to about 1/10th of the current price within 10 years (That’s $4 for you keeping score at home.).
The real question consumers will have is whether or not the new light source will be worth the price premium. New technology without a real practical application only sells to geeks with money. The LED light does bring value with its premium price. LED’s last 20-5o times longer than a regular incandescent bulb, use a fraction of the power needed to run a compact florescent light, contain no mercury and give off a very minimal amount of heat.
If you assume most businesses, governments, and households will adopt these new bulbs, then the implications are very large for companies competing in the market. Philips, GE and Siemens are currently the major players in the market with around 60% market share. Yet, this technology is in its infant stage in terms of artificial lighting application and growth. Fates may change in the coming years as more Asian manufactures like LG, Toshiba, Samsung and Sharp make their way into the market.
Cree, a U.S. based LED developer/manufacturer, is the only pure play on LED lights I know of that is public. The company in the last quarter of 2010 and first two quarters of 2011 has seen its operating income decline substantially, which is not a good sign for investors. Operating expenses continue to slowly trend upwards. The company is heavily off it’s 52 week high and has recently made an acquisition of an outdoor lighting company. No telling how long before they reach back into the heightened level they previously reached in late 2010.
In closing, though the projected bulk in market growth of LED lights is likely to come in 4-10 years, you have to wonder how these companies and/or divisions will fare after the boom. I am sure the technology will continue to improve, but to what degree? After most businesses/consumers/governments have adopted these bulbs, it will be about 20 years before they need a replacement. If that holds true, then we will certainly see a boom and bust period for LED manufactures. In this case, I would expect the bust to be quite apparent…but maybe we’ll get too caught up in the moment?