Incandescent Phase-Out Boosts LED Lamp Producers

Retail price of LED lighting is becoming increasingly more popular

General Electric's (GE's) announcement that it would close down its last incandescent-bulb factory in the United States in September this year was a forceful reminder of the approach of the 2012 deadline that many economies, including Taiwan, have set for the banning of incandescent lights as part of their “green energy” programs.

Industry executives are confident that the end of incandescent bulbs will give a boost to more energy-efficient lamps such as light emitting diode (LED) lamps. LEDinside, a Taiwanese market consulting firm, estimates that around 20 billion incandescent bulbs are being consumed a year worldwide and believes that the ban on them will bring business opportunities to suppliers of LED bulbs rated below 10W.

Lighting consumes as much as 19% of the world's electricity output. Experts estimate that 30% of the electricity used for lighting could be saved by replacing incandescent and other energy-hungry lamps with more efficient lamps, and that another 30% could be saved by adding intelligent grids and sensors. Such savings are vital, since reducing energy consumption can help achieve the Kyoto Protocol's goal of cutting carbon dioxide emissions 5.2% below 1990 levels by 2010.

As part of the emissions-reduction efforts, the world's economic powers have come up with their own deadlines for ending the use or production of incandescent bulbs. The European Union banned 100W light bulbs in 2008 and vowed to phase out all types of traditional bulbs from EU markets in 2012. The United Kingdom announced in 2007 that it would phase out incandescent bulbs by 2011, the United States will discard most of them between 2012 and 2014, Japan will stop producing and selling high-wattage incandescent bulbs in 2012, and Taiwan will ban the production of such bulbs in 2012. Korea will prohibit the use of incandescent bulbs in 2013, Russia will ban production and consumption in 2014, Mainland China is halting consumption between 2008 and 2018, Canada is banning the bulbs by 2012, and Australia has a law to ban most sales of incandescent bulbs by 2010.

More Affordable
As the deadlines approach, industry watchers predict that retail prices of LED bulbs will drop to a more affordable level. In early 2009, for instance, a 7W LED bulb that cost US$15-20 to make was retailing for around US$50; early this year the cost of production was down to around US$12, and the retail price had fallen to barely US$30.

Executives at Epistar Inc., currently Taiwan's No.1 LED chipmaker, report that the island's LED heavyweights are planning to offer 6W LED bulbs at a retail price of around US$19.99 this year as a substitute for 40W incandescent bulbs.

Industry executives estimate the price will plunge to US$9.99 in 2012, when incandescent bulbs are to be expelled from the European Union market. Taiwan's foremost LED-lighting manufacturers are working to boost the light output of their products while reducing production costs. They expect to turn out lamps to replace 60W incandescent bulbs in 2012.

Some institutional investors believe that the first wave of demand for LED bulbs triggered by the 2012 incandescent bans will happen in the second half of 2011. Taiwan's LED makers have begun gearing up to meet that demand.

Epistar predicts that lighting chips will account for 30% of its total sales in 2011, up from 20% this year.

Genesis Photonics Inc., another Taiwanese chipmaker, has entered into an alliance with JFE of Japan to penetrate that country's LED-lighting market through JFE's fluorescent lamp recycling network. Genesis has also formed a partnership with the government of Kunshan City in the eastern Chinese province of Jiangsu, paving the way for access to the city government's LED lighting contracts.

Ledtech Electronics Co., an LED packager, has recently won a contract to supply over 400 streetlights to the Taiwan Railways Administration's Taoyuan Station. The company has also been contracted to equip the 8,000 Maybelline cosmetic counters across Japan with LED lamps. Ledtech is working to capture orders from stores in Taiwan, including RT-Mart and Wellcome.

Industry watchers point out that to make products competitive some Taiwanese lighting manufacturers build second-tier chips into their lighting fixtures.

Although Taiwan's LED-lighting manufacturers have considerably reduced the cost of their products, they will still have to overcome tough competition before taking over the incandescent market since compact fluorescent lamps are much less expensive and perform with satisfactory efficiency. Industry watchers point out that for the time being LED-lighting manufacturers will have to attract customers by touting the longevity, energy efficiency, and zero mercury features of their products.

Before too long, however, price might be a competitive advantage as well. Based on the U.S. Department of Energy's prediction that the cost of LED lamps will move much closer to that of compact fluorescent lamps by 2015, Taiwan's industry watchers believe that LED lamps will soon become affordable to the average consumer.