The future of LEDs is looking brighter and brighter.
Light-emitting diodes have been around since the early '60s, and
was the first to develop them as a source of light.
But they have long been seen as inferior to standard light bulbs and are used mostly in places where bulbs aren't practical, such as calculator screens, model railroad cars, message displays in airports and, increasingly, illuminated screens on iPods and mobile phones.
The backlighting in mobile devices proved a sort of tipping point for LEDs, spurring enough demand to allow dozens of companies to invest in developing the technology into maturity.
That research has helped transform LEDs from a niche-lighting technology to a form of lighting that threatens to displace light bulbs sometime in the coming decade -- the way digital cameras did to celluloid film.
But the mobile-devices market has pretty much run its course as a growth driver for LEDs. Strategies Unlimited, a Mountain View, Calif.,-based research firm, said this week that growth in the LED industry, which averaged 40% a year between 2001 and 2004, grew only 6% to $3.9 billion in 2005 -- a dramatic slowdown for an emerging industry.
Strategies Unlimited said the slowdown was caused by the downturn in the global mobile-device market, which made up 52% of the total LED market last year. But the firm expects growth to pick back up as new LED applications gather steam: automobile headlamps, TV and PC monitors and lights in homes, streets and buildings.
LEDs offer several advantages over light bulbs: They're durable, they can last 10 years, and when they do die, they fade out slowly rather than leaving you in the dark. They also light up quicker and give off much less heat than light bulbs.
And they have the potential to become far more cost-efficient than the filament-and-vacuum bulbs. While the efficiency of incandescent and fluorescent bulbs has improved very slowly over the past few decades, LEDs have become dramatically more efficient in just the past couple of years.
According to the Department of Energy, incandescent bulbs put out 15 lumens per watt of electricity -- a commonly used ratio measuring a bulb's brightness against energy used to create it. Flourescent bulbs are more efficient, putting out 60 lumens per watt. Most LEDs lights on the market now put out about 35 lumens per watt.
, a Durham, N.C.-based company that specializes in LED technology, produced an LED light last year that worked at 86 lumens per watt. And on Tuesday, Cree topped that with a prototype LED light that tested at 131 lumens per watt.
In other words, if those numbers hold up and Cree markets those lights, they'll give off the same light as a standard light bulb using less than one-eighth of the energy. Or the light of a fluorescent bulb at slightly less than half the energy, and without the pallid light that makes you and your co-workers look like you've been living underground for years without taking vitamins.
Cree has attracted some attention as a pure-play stock in an industry that is moving from supplying parts to cell-phone makers to one that could benefit from a growing demand in energy efficiency. But it's far from clear that the company will have this market sewn up for itself.
While Cree may serve as a handy proxy for the budding LED industry, there are other companies on foreign exchanges and privately held names that could present some stiff competition. In Japan,
have been active in LED development, as has Osram Sylvania, a unit within the sprawling
Meanwhile, other corporate giants have awakened to the potential windfall that LEDs may present, notably GE, which, having largely neglected the LED market since selling its patent to
, is getting back into the game.
, another big maker of light bulbs, has stepped in as well.
Cree and others are working on other applications for LED chips, such as power sources in hybrid vehicles. Already used in some computer and television monitors, LED screens may emerge as a strong rival to plasma and liquid-crystal-display screens. In fact, the more opportunities that LED chips present, the more likely companies are to invest in their development.
All of this is likely to pan out in the next few years. And until a clear leader emerges in the industry, Cree may serve as a good placeholder for U.S. investors to bide their time as the world wakes up to the potential of this still little-known technology.