Charge of the LED brigade

FOR an object whose image represents a bright idea the incandescent light bulb is increasingly being recognised as a bad one. After a century as a primary source of artificial light these energy-guzzling bulbs are set to be replaced by light-emitting diodes (LEDs), powered by semiconductors. And the switch will happen fast for a part of the electrical industry that has relied on a single technology for 100 years.

LEDs are already widely used as the backlights for mobile phones, computer monitors and televisions. A recent report by McKinsey, a consultancy, reckons that by 2020 LEDs could make up 59% by value of the total lighting market compared with 10% in 2010 (see chart). Revenues from lighting will hit €110 billion ($160 billion), roughly what the world will spend on televisions. Three-quarters of that will go on “general lighting” for homes, the biggest part of the market, and on work and outdoor illumination such as streetlamps.

The change is being driven by regulations, technical improvements and fickle consumers. Nearly half the world's light sockets have an incandescent bulb, according to Philip Smallwood of IMS Research. Conventional bulbs have changed little in a century because they are cheap, convenient and do an excellent job of shedding light. Yet lighting consumes 25% of the world's electricity and wasteful incandescent bulbs give off plenty of heat as well as useful light. America, Japan and the EU are close to phasing them out; other countries are set to do so too.

For efficiency, compact fluorescent lamps are an admirable replacement for regular light bulbs. But for home lighting they have failed to sparkle. Consumers dislike the “cold” light they give off and their poor lifespan. The small amounts of poisonous mercury they contain are also in the sights of many lawmakers. LEDs, on the other hand, use a fifth of the electricity of a comparable incandescent bulb and can last between 20 and 50 times longer.

The current drawback is price. The newest LED equivalent to a 60-watt bulb costs more than $40, compared with around $1 for a regular bulb. But prices are falling rapidly. According to America's Department of Energy new production technology should see costs tumble. In ten years' time LEDs will cost a tenth of the current price.

For the world's “big three” light bulb-makers—Philips, Osram, an arm of Germany's Siemens, and GE Lighting have around 60% of the global market—this represents something of a dilemma. Although LEDs will be more profitable than incandescent bulbs the replacement market will eventually dwindle. The bulbmakers hope that consumers will change their lights as new and better ones come along, not because the old one is broken.

They should not be too gloomy: the immediate future is bright. McKinsey predicts that the global lighting market, worth €69 billion in 2010, will grow by around 60% in a decade (not least because of the relatively high price of LEDs). As Mr Smallwood points out, more light and increasing wealth go hand in hand. The average American home has 42 light sockets compared with about 15 in China. And LEDs will be used both for new lighting and to replace old fixtures too.

Yet despite having the capital, patents and know-how the big three are set to face hot competition from firms for which LEDs are already part of their business. Asian consumer-electronics giants such as Samsung, LG, Toshiba, Panasonic and Sharp are gearing up to produce LED lights. And they may have an advantage when growing demand for essential raw materials stretches supply chains. Asia is the world's biggest and fastest-growing lighting market, so companies based there will be well placed to flick the switch on LEDs.

"Better lighting with quantum dots" - our video from Technology Quarterly, Mar 4th 2010 edition: