The Next Apple Will be Found in LED Lighting
Who doesn’t wish they had invested in Apple when it was $16 a share? Quite often, timing the market is more intuition than science. Those who know analog to digital inflection points are watching LEDs. Get it right, and enormous wealth can be created. Time it wrong and you’re left in the dust, like Polaroid.
It’s easy to look back on digital film, the Internet or mobile phones to see when the perfect conditions of cost, demand and technology converged to make the switch from analog to digital obvious. Looking at the landscape today, energy-efficient lighting, namely LEDs, is the next major market to reap the benefits of going digital.
Historically, such inflection points have proved to open a wide array of new markets, business models and product capabilities. Just consider what digital music did for the entertainment industry. The first manufacturer of an MP3 player Eiger Labs has been forgotten to history, because Apple was the one that got it right.
Even Steve Job’s former counsel Randall Sosnick is betting on LEDs. Now CEO of NEXT Lighting, he’s producing highly-innovative, reliable and affordable LED replacements for commercial florescent lighting, which are commonly T8 tubes. Just as the iPhone did for mobile computing, NEXT Lighting’s innovative design can serve as a platform for a new wave of lighting applications without the need to completely replace fixtures. At the same time, Cree has managed to get its consumer LED bulbs down below $10 a piece and Phillips isn’t far behind. These are just a few of the many market convergences that indicate the tipping point for LEDs is here and about to gain mass market appeal rapidly.
The writing on the wall
Over the past 10 years, LED lighting as grown at a tremendous pace. The LED manufacturer Cree witnessed over 150% growth rate since 2007, according to Forbes. Even small start ups like Albeo Technologies have seen revenue climb 620 percent since 2009, to over $10.5 million in 2011. Their recent acquisition by GE Lighting is just another indicator that the tipping point is near. When the big bulb manufacturers get in the game, you know something’s about to go up.
Since 2011 alone, the LED industry has seen a nearly 30% drop in prices. Couple that with increasing market demand, higher energy costs, and improved technologies and you have a perfect storm, symbolic of classic inflection points.
Niche LED markets like automotive, exit signs, flashlights and stage lighting have already hit the S-curve and hold majority market share. This benefits other markets such as architectural lighting and street lighting. Both are just now trending upward, with around 45 percent and 25 percent market share respectively, according to Vrinda Bhandarker’s report LED: Lighting the Clean Revolution.
Street lighting is considered a gateway application. Its deployment is critical to unlocking the energy saving benefits of LEDs and driving overall market adoption. The potential energy savings of LED is upwards of 40 percent for most municipalities, according to Bhandarker. Plus, the cost of installing an LED street light is very similar to sending a bucket truck to change a bulb. It’s numbers like these that Pike Research says will cause unit shipments of LED street lights to rise to more than 17 million by 2020.
After street lights, commercial/industrial applications will follow. Here light bulb maintenance and down time is a major pain point. Rising energy costs also eat into profits. LED can save this market 80% or more on energy.
Once commercial markets make the switch the residential market will blow the space wide open. The less than $10 bulbs from Cree, and soon from Phillips, coupled with the availability of the Next Lighting T8 commercial replacements are early signs savvy investors are acting on today to get in on this pending technology revolution.
Lighting represents 19 percent of global electricity. According to McKinsey & Company nearly $25 billion (conservatively) is expected to go LED by 2020. Palatable consumer bulb prices might just be the juice the industry needs to rocket up the S-curve. Unlike the sheer luck of investing in Apple when it was $16 a share, the writing is on the wall for LED market expansion. That is, if you are willing to look.
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