Robert V. Steele
The high-brightness LED (HB LED) market has had a history of remarkable growth since its beginnings in the mid-1990s, when high-performance LEDs based on indium gallium aluminum phosphide (InGaAlP) and indium gallium nitride (InGaN) were first introduced. From 1995 to 2000, the market grew at an average annual rate of 55%, to reach $1.2 billion. In 2001 the market was flat as a result of worldwide economic malaise that caused dramatic downturns in almost all high-tech sectors. Then from 2001 through 2004, the HB LED market resumed its dramatic growth, averaging 46% per year to reach $3.7 billion in 2004.
Much of this growth was driven by the increasing penetration of HB LEDs into mobile phones, for backlighting full-color LCD screens, backlighting keypads, and for other functions such as multicolor ringer lights and flash lamps for camera phones. Increasing penetration of HB LEDs was also accompanied by a rapid growth in handset unit sales, which grew from 380 million in 2001 to 675 million in 2004.
Although mobile appliances (including mobile phones and other portable electronic devices) were the dominant factor in HB LED market growth in recent years, other more established applications also continued to contribute. These included LED video screens and text messaging signs, exterior and interior lighting for automobiles, traffic signals, and a variety of niche lighting applications.
However, as mobile phones became the dominant application (accounting for 57% of the market in 2004), the HB LED market became susceptible to factors that could slow the growth of that application. In 2005, two such factors combined to dramatically impact the HB LED market for mobile phones. The first was the saturation of full-color displays, which reached a penetration of more than 80% in 2005. The second was a dramatic decline in the selling prices for HB LEDs used in keypad backlights and other low-end functions, due to overcapacity in Taiwan and Korea. The result was a decline in the mobile phone market for HB LEDs, even though handset unit sales grew by 20% in 2005.
As a result of the mobile phone situation, the market for HB LEDs grew by just 8% in 2005 to $4.0 billion (see figure). Despite the dramatic slowdown in the mobile appliance application, it still accounted for just over half of the market in 2005. Excluding mobile appliances, all other applications combined grew at a healthy rate of 21% in 2005, led by illumination.
Changing drivers
In 2006 and beyond, mobile appliances will no longer be the growth drivers that they have been for the past several years. The market for HB LEDs in mobile phones will actually decline over the next five years due to continuing price erosion and slower handset unit growth. But the total mobile appliance market is forecast to be relatively flat, buoyed by the growing use of white LEDs as backlights for full-color displays in a variety of portable electronic products, including PDAs, digital cameras, MP3 players, handheld game players, and even laptop computers.
Therefore, future market growth will be dependent on continuing growth in existing signage, automotive, signaling, and illumination applications, as well as several emerging markets that have the potential for large volumes in the next five years. Existing applications, except for illumination, have growth rates in the 5% to 15% range, so achievement of higher growth rates will depend heavily on these emerging applications.
Large-scale penetration of the general-illumination market continues to be a major priority for the HB LED industry. To date, most applications for HB LEDs in lighting have been in niche markets, primarily for colored lights rather than white lights. Such applications include architectural lighting, channel letters, contour lighting for buildings, machine vision, accent and decorative lighting, and the like. Even in these niche applications, however, the market for HB LEDs is estimated at $250 million in 2005.
Moreover, white LEDs are starting to gain ground in several applications, including retail display lighting, reading lamps, parking garages, specialty illumination (such as dock lighting at marinas), and even residential lighting. As the cost of LEDs continues to drop, and their performance continues to improve (with the expectation that white LEDs exceed fluorescent lamp efficiency of 80 lumens per watt in the next one to two years), the market for HB LEDs in illumination is forecast to reach $1 billion by 2010.
Other applications with the potential for large market growth over the next five years include backlighting of LCD monitors and televisions, and automotive headlamps. HB LEDs (used in arrays of red, green, and blue) have been shown to be superior backlights for LCD displays compared to conventional cold-cathode fluorescent (CCFL) technology. They provide a much wider color gamut, create truer and more vivid colors, and potentially eliminate motion blurring effects associated with slow LCD response times. However, the cost of LED backlights remains much higher than CCFLs, and only a few very high-end TVs and monitors have been introduced to the market, with limited success.
Looking to the future, the cost of HB LEDs will continue to decline and performance (efficiency) will continue to improve, so that the cost gap with CCFLs will shrink and a large-volume market for HB LED backlights will develop. In the near term, several large manufacturers of LCD panels in Taiwan have announced that the production of some LED-backlit products will begin later in 2006.
Many concept cars with LED headlamps have been shown at auto shows in recent years, with most of these providing dramatic styling features. Until recently, the performance of white LEDs was not high enough to meet demanding requirements for automotive headlamps, which are set by various standards bodies. However, performance has improved dramatically, and it is now expected that the first production car with LED headlamps will appear on the market in late 2007, for the 2008 model year.
While LED headlamps provide some advantages in terms of efficiency and lifetime with respect to conventional halogen headlamps, the main driver for this application appears to be in the creative styling possibilities provided by LEDs. Styling is the tool that automakers use to create brand identity as well as to bring customers into the showroom.
Despite the recent slowdown, the outlook for the HB LED market for the next five years remains highly positive, with the market forecast to grow to $8.2 billion by 2010. Growth will continue modestly for the next year or two as the impact of the mobile phone slowdown continues to be felt. But it will pick up in later years of the forecast, as new applications of LCD backlighting and automotive headlamps increase their contributions to market growth.
ROBERT STEELE is director of optoelectronic programs at Strategies Unlimited, 201 San Antonio Circle, Suite 205, Mountain View, CA 94040; e-mail: [email protected]; www.strategies-u.com.