LCD backlighting continues to thrive as pricing pressure bites

17 Dec 2004

As long as people keep buying cell phones, unit LED shipments will continue to expand, but with increasing downward pressure on selling prices, it will be new applications of ultrahigh brightness sources that drive future market growth. Michael Hatcher reports.

From Compound Semiconductor magazine.

This year is the point at which high-brightness LEDs (HB-LEDs) officially started to dominate the overall LED market. That's according to the latest report from US-based market analyst iSuppli.

iSuppli senior analyst Jagdish Rebello noted at the recent Intertech LEDs conference in San Diego, CA, that the HB-LED sector will account for nearly 60% of the total 2004 market for the devices. In 2003, the market was evenly divided, while "standard" LEDs dominated the picture before that.

And with both the standard and HB-LED markets set to enjoy further steady growth in the next four years, it is in the emerging ultrahigh-brightness (UHB) sector that more rapid expansion will be seen, says Rebello.

The iSuppli definition of standard, HB- and UHB-LEDs is as follows. Standard LEDs include those used in established applications such as indicator lights and alphanumeric displays, and have a luminous intensity of less than 100 mcd. HB-LEDs produce an intensity of between 100 mcd and 10 cd, while UHB-LEDs have a minimum luminous intensity of around 10 cd. Examples of UHB-LEDs include Lumileds' red and red-orange Luxeon emitters, which produce 11 cd and 24 cd respectively, and Nichia's 9.2 cd white device. Cree, Osram Opto Semiconductors and Toyoda Gosei are the other key players in this sector.

The overall forecast provided by iSuppli is predictably rosy, with the total LED market set to grow rapidly from around $4.7 billion this year to reach $6.8 billion in 2008. That represents a compound average growth rate (CAGR) of almost 13%. The combined HB- and UHB-LED market will grow at about 20% per annum, and will command two-thirds of the total market in 2008, according to the report. At that stage, UHB-LEDs alone will represent a $1.6 billion market.

Myriad applications are driving this market growth, and broadly speaking the key applications of today are set to remain the key applications of tomorrow (figure 1). However, a close look at the iSuppli figures suggests where there may be some changes, as applications incorporating brighter devices, particularly in decorative and general illumination, begin to emerge. In terms of chip materials, the market for GaN-based LEDs will grow faster than that for AlGaInP, but despite this the latter is expected to maintain the larger market share through 2008 (figure 2).

Keypad backlight market falls

The share of the market driven by cell-phone keypad backlighting is expected to decline markedly as pricing pressures take hold and handset OEMs look to use fewer devices in their products. After enormous growth in the 2002-2004 period, iSuppli predicts that the dollar value of this market will peak this year, with a 13.5% decline expected in 2005 and a similar trend to follow (figure 3).

Part of that trend can be explained by the predicted slow-down in the growth of the cell-phone market itself. This phenomenal application sector, which is now expected to reach around 670 million units this year, will continue to grow, but at a slower rate than has been witnessed in recent years. Coupled with declining average selling prices for blue HB-LEDs typically used to backlight keypads, this will drive the sector's value down.

However, by far the most dominant LED application in cell-phone handsets is display backlighting. It accounts for the lion's share of the wider LCD backlight sector, which is worth an estimated 25% of the overall LED market. LCD backlighting with LEDs already represents a billion-dollar industry. Currently accounting for around half of the HB-LED market, such backlights for LCD screens are set to appear in camcorders, notebook computers and desktop monitors, and will propel this segment towards the $2 billion mark, maintaining its share of the overall LED market at around 25% (figure 4).

LED-illuminated LCDs are also now penetrating the TV industry - Sony is using products from Lumileds and others to improve the color reproduction of images on screen (see LEDs attempt the jump from small screen to large screen ).

All of the other application areas for HB-LEDs are much smaller than the cell-phone handset market, but together they will account for around 35% of the overall LED market in 2008, and more than half that of the HB and UHB-LED sectors.

Traffic signals currently represent some 4.4% of the total LED market, a share that is set to grow as UHB-LEDs are incorporated into high-visibility lamps and the proportion of HB-LEDs used in this application declines. "With the development of UHB-LEDs, some vendors are supplying standard traffic-signal products with 6, 8 and 10 UHB-LEDs for red, yellow and green traffic lights," said Rebello in the report. He predicts that next year a significant fraction of these signals will migrate to UHB-LEDs. Currently worth around $200 million, the market is dominated by HB-LEDs, which have a market share of more than 80% in the application. The situation is set to reverse by 2008, when UHB-LEDs are expected to take an 80% share of a sector that will be valued at around $330 million.

LED headlamps - not until 2008

The automotive market for LEDs is being targeted by many vendors, and is viewed as one of the key applications that the industry must penetrate if it is to make significant progress. However, this will be complicated by the fact that car manufacturers in different countries have different reasons for incorporating LEDs into their vehicles. "While American car makers favor LEDs for their styling and design flexibility, Japanese and European manufacturers tend to value the longer lifetimes and lower power consumption," said Rebello.

According to the report, the market for LEDs used in automotive lighting will grow at a CAGR of 13.6% from $281 million at present to $446 million in 2008.

With around 30% of new cars sold in 2003 using at least one LED lighting system, there is clearly plenty more of this market still to penetrate. In 2004, automotive applications emerged to become the third-largest market sector for HB-LEDs and the fifth largest sector overall. And although car headlamps powered by white LEDs are often seen in concept cars, Rebello believes that these will only begin to emerge around the 2008 time frame at the very earliest, as UHB-LED manufacturers work to improve output powers.

Video market doubles

Measured by area, the market for large LED-based video signs is expected to double from 40,000 m² in 2003 to 80,000 m² in 2008. In terms of dollar value, this represents a CAGR of 9%. Currently dominated by HB-LEDs, iSuppli expects that UHB-LEDs will have around half of the market share by the end of its forecast period.

So-called "decorative" lighting, where LEDs are used to illuminate public spaces such as hotels, retail stores and gardens, represents one of the biggest growth areas for the technology. Despite being a small market currently, iSuppli predicts a CAGR of around 50% as designers increasingly exploit the flexibility of LED emission regarding different colors and brightnesses. Although accounting for just 2% of the overall LED market in 2003, this figure is set to rise sharply to around 8% in 2008 as UHB-LED manufacturers in particular feel the benefits of a market that is primarily geared up to grab customer attention.

Worth an estimated $12-14 billion annually, the general illumination market remains the single biggest addressable market for LED technology. Acknowledging that serious penetration remains a long way off, iSuppli says that LEDs account for a "negligible" percentage of the current market. This is likely to remain the case for the next few years, with Rebello predicting that we will have to wait until 2015 before LEDs appear in general lighting to any significant degree. The biggest reason for this is price, with LED lamps currently costing around 100 times as much as traditional lamps. "The days of the light bulb, as we know it, are not yet numbered," said Rebello in his report.

He also warned against LEDs being developed simply as a replacement technology: "If all LEDs do is replace traditional sources in lighting applications, then their success will be limited. Lighting designers, OEMs and module manufacturers must look to harness the power of LEDs in new applications and advance the overall lighting industry." But even as penetration does begin, an interesting tension may arise from the longevity of semiconductor-based lights. As LED-based lamps need replacing far less frequently than traditional light bulbs, the replacement market will undergo a "dramatic contraction".

Requirements for growth

Rebello highlighted some key developments needed to drive the next "growth spurt" in the industry. The primary requirement is for new applications, particularly those that use UHB-LEDs. One example of this - in the short term - could be head-up displays (HUDs) in cars, in which a UHB green emitter projects information traditionally displayed on the dashboard onto the front windscreen. Another possible growth driver is the application of high-power white LEDs in LCD projectors.

Osram has made some progress in both these application areas, having recently released its new "O-star" white LED. O-star is a high-power RGB source that uses the Regensburg-based company's thin-film chips, which minimize light loss through the edges of the device. It emits more than 120 lm from its 3 x 1 cm profile, with the source consisting of one red, one blue and two green thin-film chips, a ceramic carrier for connecting to the heat sink, and electrostatic discharge elements that are said to provide reliable protection against high voltages. Osram is targeting projector backlight applications, noting advantages such as a much reduced warm-up time, plus the oft-quoted improvement in lifetime.

The German LED maker has also developed a red and green light source for automotive HUDs. The technology is being used by Siemens in a driver information system that it is supplying to Germany-based car manufacturer BMW (Compound Semiconductor April p8).

Other developments identified by Rebello as critical to future growth include: a need for average selling prices to drop at "high double digit" rates per year; additional manufacturing capacity to come online by 2006; more LED vendors; the development of semiconductor drive circuitry for dynamic control of LEDs; and stimulation of the corporate and retail lighting markets, which have been slow to take off.

On top of that, Rebello called for the industry to develop standards particularly for package designs, and to stay aware of developments in organic LEDs (OLEDs). "Every OLED display will replace an LCD display and reduce the available market for LEDs," he said, while projecting that the OLED market would mushroom to around $3.25 billion by the end of the decade - mostly through applications in cell-phone displays.

• iSuppli's latest LED market report "Solid-state lighting: brighter LEDs continually expand illumination application" is available at www.isuppli.com.