The Dramatic Rise of LED Growth

In the previous post, we looked at how light-emitting diodes improved parts of American daily life from calculators to traffic lights to clothes. However, one hundred years after their invention, there was one frontier that LEDs had not yet penetrated: the everyday light bulb. This week, for the final piece of the LED puzzle, we examine the rapid LED growth and discover how LEDs transformed general illumination in less than a decade.

To read earlier articles in our history of the LED, click here: Part One; Part Two; Part Three.

Before that explanation, however, it is worth pausing to note of the speed of the lighting transformation. It is hard to overstate how quickly LEDs have overtaken the market. As recently as 2012, LED sales captured less than one percent of the market. By late 2016, that figure was 43 percent. It is expected to rise as high as 75 percent by 2020. With growth rates like that, some analysts have compared the LED growth spike to similarly speedy market transformations in industries such as automobiles or personal computers. As manufacturers prepare to phase out competing lighting options, LED sales will grow even faster. While much ink has been spilled examining the potential impact of the LED growth revolution, little has been written about how LEDs overturned the lighting market so quickly. The explanation is layered. The factors that made LEDs the dominant light– a combination of research breakthroughs, innovation, federal support, competition, and consumer demand – emerged almost simultaneously. The result? A rapidly expanding market of affordable, superior lights that save both energy and money.

The Obstacles to LED Domination

Several challenges prevented light-emitting diodes from rapid expansion. First they were invisible. Then they were red. Then they were yellow, green, and blue. Once researchers overcame the color limitations, LEDs still faced burdens of efficiency, cost, and appearance. A flaw in any one of these categories would prevent LEDs from displacing incandescents because incandescent bulbs were so cheap and established. As recently as five years ago, the necessary improvements remained elusive. In 2012, LEDs captured less than one percent of the general illumination market share.

With breakthroughs in each of these areas, scientists eventually engineered an LED powerful, beautiful, and affordable enough to compete with incandescents. Once researchers cleared this hurdle, sales numbers spiked. LEDs swiftly supplanted the competition. Experts expect LEDs to represent as much as 75% of the lighting market by 2020. The improvements that made this possible were small, technical, and largely invisible. But they were necessary to enable the energy efficiency revolution sweeping the country.

Efficient, More Efficient, Most Efficient

Although more efficient than comparable incandescent lamps, LED bulbs in the early 2000s lacked a large enough efficiency advantage to stand out. While they didn’t get hot to the touch, LEDs still lost too much energy to heat. This problem was especially acute at higher currents, including at the amount needed to light a room. As designers LEDs crafted brighter and brighter LEDs, the lights wasted more and more energy. One possible cause of the problem, scientists discovered in 2013, was known as Auger recombination. This process, the researchers found, caused the brightness of LED bulbs to droop at higher currents. While one group of researchers focused on the cause of the problem, another group designed bulbs to overcome it.

The emergence of more efficient LEDs was swift and dramatic. In 2012, the average LED bulb had a similar efficiency to a competing CFL bulb but cost considerably more. Because of heat loss and other inefficiencies, LEDs bright enough to light a room still used too much electricity. Two years later, manufacturers cut LED energy usage in half. They overcame inefficiencies due to Auger recombination. By 2014, LEDs outpaced CFLs and boasted a lighting efficacy that was seven times better than traditional incandescent bulbs. Although they still cost more than similar alternatives, in two short years LED manufacturers solved the efficiency challenge and made LEDs competitive for consumers.

Feds Watching

At the same time that researchers improved the efficiency of LED bulbs, lighting companies achieved comparable cost reductions that made LEDs even more competitive. One of the biggest contributors to that price drop was government support. By funding research grants and innovation prizes, agencies like the Department of Energy supported the discovery of cheaper LEDs. Furthermore, through a combination of regulations, mandates, and financial support, state and federal governments fostered the creation of incentive-laden energy efficiency programs. These programs offset expensive LED costs and enabled/pushed utilities to support upgrades to more efficient lighting.

A key discovery in 2012 also permitted a significant price drop for LEDs. Since 1994 when three Japanese researchers discovered the blue LED, manufacturers had built a key component of these lights using sapphire. Duplicating this semiconductor, gallium-nitride, sitting at the core of the diode was laborious and expensive. In 2012, LED maker Osram grew a similarly effective semiconductor using silicon instead of a precious gemstone. The finding sparked a new wave of innovation. LED companies declared that silicon-based LEDs would cut production costs by 75 percent. By 2014, not only were LEDs more efficient, brighter, and supported by government and utilities programs, but they were also much cheaper to make. The combination of these factors led to the final contributor to massive LED growth.

A Little Competition

The last ingredient to the LED success story was an industry price war. Near the end of the last decade, LEDs cost as much as $100 and retailed for about sixteen cents per lumen (a measure of brightness). After improvements in efficiency and manufacturing costs in the early 2010s, lighting companies jostled to produce more affordable home LEDs. In 2012, Philips won a $10 million prize for creating a 60-watt equivalent bulb that could retail for under fifty dollars. The first LED priced below $10 came to market just one year later.

With costs plummeting, lighting companies battled to be recognized as the industry leader. Cree produced a commercial series starring Lance Reddick that aired during the NBA playoffs. When Cree dropped the price of its 40W equivalent to $10, Philips responded with a 60W equivalent priced at $9.97 after rebate. Then Wal-Mart countered with its own $10 LED. The price has fallen even further from there. Eight dollars bought a 60W equivalent in 2014. An 8-pack of 60W equivalents costs twelve dollars today. In eight years, the price of LEDs tumbled by more than 90 percent. Customers could get more than one lumen for each penny they spent. The LED growth curve crossed the tipping point.

The LED growth spike is transforming the general illumination market. LEDs leapt from almost no market share to a fifty percent share in five short years. The factors that supported the growth – innovation, government support, efficiency, and competition – remain in place. These same factors spurred a railroad boom crisscrossing the country in the 1870s. They fed a tract housing surge in the 1950s. From a simple semiconductor diode to a new world of illumination, the history of LEDs is the story of incremental innovation and sudden breakthroughs. A similar revolution is underway in everyday lighting. Enjoy the new lights and energy savings. Unlike even a few years ago, the LEDs are everywhere.

Matthew Kahn

Content Writer

Posted on 10.19.17

Energy Innovations