The light bulb goes digital

Companies for years have toyed with light-emitting diodes, which use the same technology as computer chips. Now LEDs are having their day in the sun.

The $100 billion global lighting industry is undergoing radical change: New office buildings and retail outlets are abandoning fluorescent lighting in favor of LEDs, or light-emitting diodes, those tiny, energy-efficient, long-lasting, and blindingly bright points of light. Giants such as GE (GE) and Philips are shifting production from incandescent bulbs to LEDs. Even the local Home Depot (HD) — which today probably stocks only a couple of LED lighting products — will soon carry a bouquet of LED bulbs, ultimately edging out fluorescents and halogen lamps. By the end of the decade, analysts predict, LEDs will be the dominant source for commercial and residential lighting.

LEDs, which are based on a technology similar to that of computer chips, have more in common in their design and manufacture with your laptop than with the incandescent bulb that Thomas Edison patented almost 130 years ago. As lighting goes digital, the industry is likely to encounter some of the same upheaval that took place when television, music, and other businesses shifted away from analog technologies.

Lighting is dominated by three enormous global companies: General Electric, Germany's OSRAM (makers of Sylvania products), and the Dutch company Philips. But with LEDs coming on strong, the industry is now opening up to companies such as Samsung, LG, and Panasonic (PC), which have expertise in semiconductors.

"From where I sit, lighting is undergoing the same transition that the film business did when digital cameras first came out," says Chuck Swoboda, CEO of Cree (CREE), a publicly traded LED manufacturer and lighting-systems company based in Durham, N.C. "I think the writing is on the wall for older types of lighting technologies. It's just a question of how quickly we make it happen."

Music. Movies. Light bulbs?

But incumbents such as Rudy Provoost, CEO of Philips Lighting, the largest lighting company in the world, are embracing change too. Provoost estimates that LEDs account for less than 5% of the almost $10 billion in lamps and fixtures his company sells today. "Where is the market [for LEDs] 10 years from now? Just pick a number," Provoost told analysts last fall. "It could be 70, 80, or 90% of our business. We think it's going to grow very, very fast."

Until very recently, however, the use of LED technology in lighting installations had moved very slowly, partly because the lights were so darn expensive compared with the products already on the market. The first visible light-emitting diodes were demonstrated by GE in 1962, but it was Monsanto (MON) and Hewlett-Packard (HPQ) that first put LEDs into commercial products: indicator bulbs for cars and displays for the electronics tools HP was selling in those days. The bulk of the cost of the groundbreaking HP-35 calculator, which sold for $395 when it was introduced in 1972, was for the red (the only color available then) LEDs it required.

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Resource: http://brainstormtech.blogs.fortune.cnn.com/2010/01/26/the-light-bulb-goes-digital/