A T Kearney compares LED roll-out with the introduction of the transistor

October 17, 2012 // Christoph Hammerschmidt

In a recent study, management consulting firm A T Kearny ascribes the highest industrial and technological value to LEDs: Their introduction has a similar transformational potential as the invention of the transistor back in the 1940s which triggered the ongoing electronic revolution.

The properties of LEDs, while known to more or less all engineers, seem interesting enough to A T Kearney's business gurus to expect another fundamental industrial change. Long operating life, instant, dimmable light without significant heat emission, no mercury, small size and high efficacy - all these properties give the LED an edge over existing lighting solutions. Ongoing research and innovations will help to further expand the technology's potential, the company writes. The study expects an annual growth of some 50% through 2015. By 2020, the market share of LEDs in the lighting market could realistically reach 90%. What's more, the LED market dynamic is still gaining momentum. The market profile will gradually change over time - while currently light bulb replacement is the driving factor, this factor will be less dominant in the future. Nevertheless, the entry of new players from the semiconductor industry as well as from consumer electronics will stir up the market.

Because the replacement business is on the downswing, entrenched manufacturers such as Samsung LED, Osram and Philips will need to revise their market strategies, the study suggests. At the same time, the still fresh trend towards vertical integration along the value chain will intensify. An example for this trend is GE's recent acquisition of Israeli LED manufacturer Lightech, the A T Kearney experts point out. Another example is the comprehensive IP cross-licensing agreement between Philips and Cree. Philips also took over North American luminaire manufacturer Genlyte in an effort to control fixture production. In the medium term, A T Kearney expects similar moves.

For new entrants, this is not an easy market, the experts warn: semiconductor production is very capital expensive, the market is peppered with IP issues, and the lack of standards has caused an extremely fragmented driver business. The main hope for newcomers might be to differentiate themselves by understanding regional issues and building strong customer relationships. A T Kearney sees an "innovation trilogy" consisting of the building blocks technology, application and design. Newcomers have to consider them all. In terms of technology, the potential lies in efficacy, miniaturization and light color. Application offers more opportunity to differentiate - the application options are almost unlimited. For this reason, the experts expect numerous innovative concepts. Both technology and applications are tightly connected to the design factor where only a small fraction of the options so far has been realized.

In the light of all these uncertainties and chances, success does not necessarily depend on getting bigger or cover the entire value chain. Nevertheless, the ability to cover the abovementioned "innovation trilogy" will make the distinction between winners and also-rans, the experts say.

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December 15, 2011 | Texas instruments | 222901974

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