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For GE, Philips, Cree, LED Lighting Brightens Future

 

BY PATRICK SEITZ,INVESTOR'S BUSINESS DAILY Posted 07/08/2011 05:46 PM ET

It soon will be lights out for traditional incandescent bulbs. And companies making LED lighting hope their products eventually will become the standard replacement.
But near term, light-emitting diodes are too expensive for mainstream lighting, despite their clear advantages in energy savings and impact on the environment, analysts say.
On Jan. 1, under federal law, the 100-watt incandescent bulb will disappear from store shelves nationwide. The law will phase out the 75-watt incandescent beginning in January 2013 and the 60-watt and 40-watt versions in January 2014.
The incandescent light bulb, invented by Thomas Edison in 1879, is energy inefficient, and the U.S. government wants to stimulate the use of lighting alternatives. Other nations have implemented similar phaseouts or outright bans.
Halogens, CFLs In Picture
Alternatives include halogen lights, compact fluorescent lamps and LED lamps.
Many analysts say LED lights eventually will win out, but their price will need to come down significantly first.
'If LEDs got down to the same price as compact fluorescent lights, it's a no brainer,' said Eric Higham, an analyst with Strategy Analytics. 'But we don't see LEDs getting into shouting range of CFLs (in price) in the next four or five years.'
The number of companies producing LED lights has exploded in recent years because of the expected opportunity, Higham says. Despite their higher cost, LED lights are starting to catch on because they trump the alternatives for energy efficiency, expected lifetime and safety.
'If you had gone to a Home Depot (HD) or Lowe's (LOW) store even a year ago, you might have found one or two LED bulbs,' said Joseph Rey-Barreau, education consultant with the American Lighting Association. 'Now you can find an entire bin — 8- or 12-feet wide — full of LED options for replacement bulbs.
The problem right now is that they're very expensive. They're generally in the range of $20 to $50 for an LED light bulb.'
During the early years of the incandescent phaseout, CFL lights will be the go-to replacement, analysts predict.
But they have some major drawbacks. The biggest negative for CFLs is that they contain mercury, a toxic element. That means the bulbs must be treated as hazardous waste.
That's why 'LEDs are likely to be the best long-term solution,' Rey-Barreau said. But the LED lighting market is in its infancy with many technological improvements ahead, he says.
The LED market generated $9.5 billion in global sales last year, mostly for backlights to flat-panel displays in TVs, computers and smartphones. Only $150 million in LED sales came from the residential, general lighting market, says Strategy Analytics. 

In 2014, LED sales are seen rising to $19 billion, with $600 million coming from residential lighting, Higham says.Companies in the LED lighting field include diversified lighting giantsGeneral Electric (GE
), Philips Electronics (PHG) and Siemens'(SI) Osram unit, as well as LED-only vendors such as Cree (CREE) and Lighting Science Group.

'It's a totally wide-open market,' Rey-Barreau said. 'If you go to any of the lighting shows, from my own experience, more than 50% of the companies there are ones you've never heard of in terms of LED.'
While the residential market has been slow to adopt LED lighting, the commercial market has been going gangbusters for it. That's because lighting makes up a greater percentage of the electricity bill for retail stores, factories and offices than it does for homes, Rey-Barreau says. And corporations take a long-term view, beyond the upfront costs.
Big Commercial Factor
Lighting is typically 5% to 10% of a home's energy bill. For office buildings, lighting represents 30% to 40% of the energy bill. For shopping malls and retail stores, lighting can be 60% to 80% of energy costs, he says.
'Long term, LED is going to be huge,' said Steve Briggs, vice president of marketing and product management at General Electric's lighting products unit. 'LED offers most of the attributes that consumers and professional users are looking for.'
But since the purchase price is expensive, lighting firms like GE have to offer a range of alternatives, he says. GE sees a 'nice runway' for halogen and CFL lamps as incandescent bulbs are phased out, he says.
The switch to alternative technologies could shake up the lighting business in the years ahead.
'Certainly the competitive landscape will change over the next decade,' Briggs said. 'There are hundreds of new LED startups in the market that weren't around three years ago.'
LED lighting should get a boost when home construction picks up again, says Greg Merritt, vice president of marketing and government relations for Cree.
If you're building or remodeling a home, it makes sense to use LED lighting because it's a good investment in the property, he says.
Cree sells LED components to lighting and electronics manufacturers. It also sells a 6-inch residential downlight at Home Depot for $49.97.
The U.S. law mandating more energy-efficient lighting will be good for the LED business, Merritt says. It will get people to think about the cost of a product over its lifetime instead of just the initial purchase price, he says.

 

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