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LEDs: the next multi billion dollar industry?

|Includes: AIXXF, Cree, Inc. (CREE), PHG, VECO
In today’s society there is continuous demand for devices with lower energy consumption, and higher efficiency. Light Emitting Diodes (LEDs) are used in a large and increasing number of applications from backlighting for LCD televisions and laptop displays, projectors, flashlights, to car tail/head lights and general illumination applications such as street lighting, parking garage lighting, store and building interior and exterior lighting. LEDs are semiconductors diodes with a direct band gap. Typically the emission wavelength corresponds to the band gap energy. LED based light sources used for general lighting can be realized either by mixing different LEDs emitting with red, green and blue light, or using a phosphor material to convert quasi monochromatic light from a blue or UV LED to broad spectrum white light.

The LED market has been growing fast. For 2008 growth was around 11% for a market size of about $5 billion. In 2009 strong growth has occurred in emerging markets such as backlights for LCD displays in notebooks and TVs, and general lighting. Several reports indicate an expected compound annual growth rate of 25% for High Brightness (HB) LEDs through 2013 for a $15 billion market. General lighting applications are the holy grail of HB-LEDs with an estimated $100 billion market.

LEDs have extremely high efficiency (>150 lumens/W), long useful life (> 50,000 hours), and do not contain mercury unlike Compact Fluorescent Lamps (CFLs). A typical incandescent 75 W light bulb produces around 1000 lumens, for an efficiency of only 13 lumens/W. This low efficiency has resulted in manufacturing restrictions, and production of incandescent light bulbs is already being phased out across the world due to government regulations. CFLs have higher efficiency at about 66 lumens/W, with a 15W CFL bulb producing around 1000 lumens. LEDs have even higher efficiency, and at 150 lumens/W that would require only 6 W to produce 1000 lumens, or “replace” a 75 W incandescent bulb. Of course, cost matters and universal adoption of LEDs would probably occur at a cost around $1/1000 lumens. This is typical for incandescent bulbs but much lower than what is currently achieved with LED fixtures, around $10-30/1000 lumens.

Consequently there is an enormous effort across the world to increase LEDs efficiency while simultaneously decreasing manufacturing costs. In terms of LED efficiency several companies are reportedly on track to achieve around 300 lumens/W by 2015. Considering that in the US around 29% of all electricity is consumed in lighting, LEDs provide the potential for around 120 GW savings/year in the US alone.

As HB-LEDs are set to explode many are the companies that are waiting for being rewarded on increasing sales. Some of the top worldwide LED companies include Cree (NASDAQ:CREE), Osram, Philips Lumileds (NYSE:PHG), Nichia and Toyoda Gosei. Typically the first step of LED manufacturing is the epitaxial growth of the LED material (for example GaN) on a wafer substrate such as sapphire, silicon carbide or silicon. This is typically performed by metalorganic chemical vapor deposition (MOCVD) and as consequence leading manufacturers of MOCVD equipment such as Veeco Instruments (NASDAQ:VECO) and Aixtron (AIXG) have recently experienced strong sales growth. After litho, etching and metalization steps LED dies are created on a wafer typically 2 inch diameter (expanding to larger sizes). Once you have die on a wafer, they need to be separated into individual LEDs. Lasers have proven to be an invaluable tool for LED manufacturing, as they have become the standard tool for laser lift off, wafer scribing and die singulation. More information on lasers in the manufacturing of LEDs can be found here. After die singulation, binning, phosphor coating (for “white” LEDs) and packaging are the final steps of LED manufacturing.

The future is "bright" for LEDs.

Disclosure: Long CREE, PHG, VECO, AIXG