DEFINITION OF THE MARKET - LED Lighting Product Development and Marketing Strategies: A Busines

LED industry

Market Analysis

The first sense of LED light emission was discovered in 1907 by a British experimenter, H.J. Round, but the actual creation of the first LED was by Russian inventor Oleg Losev in 1927. It was not until 1962 when the first commercial LED lamp was ready to be sold on the market by Texas Instrument (TI) (“Light-emitting Diode,” 2018). Since then, continuous discoveries and development are made, from different colors to shapes, including LED display, backlight, based LED, LED strips, surface mounted device (SMD), chip on boards (COB) and so forth. These can be found in cashiers, automobiles, radio display, electronics, and many other types of applications.

As the industry continues to grow, LED components are designed into lighting solutions in the 1990s. At that time, due to the fact that LED is more expensive than traditional solutions, it was not widely accepted. It was not until the 2000s when energy efficiency is strongly taken into account, especially by the government and businesses, that LED lighting is becoming a consideration. Products are developed to replace traditional incandescent and fluorescent light for different markets, including store lighting, office lighting and street lighting. Today, LED lighting solution is rapidly growing. For manufacturers, products are more standardized and costs are lowered. For customers, either businesses or the general public, the traits of energy efficiency, long longevity, high light quality and low maintenance cost are some of the reasons that grabs their attention. And also the fact that larger well known manufacturer brands, such as Phillips, Osram, Edison Opto, and General Electric (GE), have been attracting attention on a global level with their product release (“LED Lighting Market to Drive Speedily,” 2018).

The only, and probably the most important, disadvantage is the cost of installation of the LED lamps. Nevertheless, based on a report by Zion Market Research (“LED Lighting Market to Drive Speedily,” 2018), the global LED market is growing at a compound annual growth rate of 13% between 2017 and 2022, expecting to reach USD 54.28 billion by 2022 (Figure 1).

Figure 1. Estimated global LED lighting market growth from 2016 to 2022. Adapted from LED Lighting Market to Drive Speedily and Reach USD 54.28 Billion by 2022, by Zion Market Research, September 11, 2018, retrieved from https://www.zionmarketresearch.com/

LED has been replacing most of the traditional lighting applications that almost all the possible application has been occupied. To find a new lighting market to penetrate and evolve in is a deep search especially with the vast amount of competitors in the industry. If to follow the popular trend of connecting LED products with IoT (Internet of Things) technology such that it can connect to Google Now or Amazon Alexa, the product would need to be reachable to the general public in super stores or super markets. However, this is possible for Energyled is a B2B company, so selling to the general public is not within its distribution channel. Not to mention, bigger brand manufacturers with more research funds have already developed a full system for it. Hence, it is not wise to join such a market when competitors are already way ahead in that particular market. Possible choices as a target market is one that is starting to grow or has not yet been fully developed. For example, the ultraviolet lighting market.

13 Competitive Analysis

The LED industry has been around for more than five decades. Competition continues to grow yearly with many new LED companies sharing a piece of the market. From competitors, domestic to abroad, the more well-known brands occupy a large part of the share.

While the other smaller brands share the remaining portion with its own qualities. Major competitive factors include products and service, quality, reliability, distribution channel and more, that varies in importance for different customers.

The big branded companies all started from developing LED components and evolved into the lighting sector. The most known international brands are Cree, Osram, Philips, Samsung and Nichia, and some local Taiwan brands include Everlight, Liteon and Edison.

They all have front guard innovative technologies, such as connecting LED lighting products to IoT or complete sensor systems. But in areas of technical expertise, they do not fully dominate. It is rather the smaller companies that have their own R&D teams and work on quality more than marketing. In contrast, similar in any industry, there are companies that produce low quality products based on copying and low cost. These companies can be found in any country, where a vast majority are found in mainland China. Customers without much knowledge about LED are more likely to be attracted by their price.

A competitive analysis is shown in Table 3 of Energyled with four competitors: Edison and Everlight from Taiwan, Philips and Osram from abroad. The factors listed are ones that customers would care about and compare when considering which company to do business with. By comparing products, quality, selection, service, reliability and expertise, Energyled is as good as competitors. Whereas, it is in brand recognition, global distribution and advertising that it is weaker at. Edison although is better than Energyled in area of marketing, but not better in products and its selection. This is similar for Everlight, which is a big brand in Taiwan but not as popular as Philips or Osram on the international level. Philips and Osram can be said as the biggest competitors for Energyled, excelling in all areas.

14 Table 3

Competitive Analysis of Energyled with Two Domestic (Edison, Everlight) and Two International (Philips, Osram) Companies

Factor Energyled Edison Everlight Philips Osram

Products 5 4 5 5 5 LEDs (Muramoto, Kimura & Nouda, 2014). The UV LED market started since the early 2000s and has been gradually emerging. Based on a study by Yole Développement (“UV LEDs,”

2018), the UV LED market has grown from 8.3% to 25.3% out of the total UV light source market over the past decade (Figure 2). With this continued growth and the worldwide ban on mercury vapor lamps in year 2020, the global UV LED market is forecasted to reach USD 1,163.5 million by 2023 (“Global Ultraviolet LED Market Analysis and Forecast 2017-2023,”

2018).

Figure 2. Evolution of UV light source market: 2008-2013-2018. Adapted from UV LEDs – Technology, Manufacturing and Application Trends 2018, by Yole Développement, May 2018, retrieved from https://www.i-micronews.com/mages/Flyers/MEMS/YD18017_UV_

UV rays are divided into three types based on their spectrum wavelength: A, UV-B and UV-C (“Ultraviolet Radiation and Health,” n.d.; “UV LEDs,” 2018). They can be used in various applications in replacement of UV light sources, including air and water disinfection, sterilization, curing, medical, biotechnology, and security (Muramoto et al, 2014; “Uses of Ultraviolet LED Lights,” n.d.), based on their wavelengths (Table 4). UV-A rays has wavelength band spectrum of 315nm to 400nm and is found most commonly in UV applications. It contributes greatest to the increasing growth within the UV market, particularly the curing system. Its success even contributed to the gaining popularity of air and water disinfection systems (“Global Ultraviolet LED Market Analysis and Forecast 2017-2023,”

2018). Other applications with UV-A rays include the printing system, banknote detection, tanning and photocatalytic purification (“UV LEDs,” 2018). UV-B ray’s spectrum ranges from 280nm to 315nm. It is used mainly in medical phototherapy and plant growth. In phototherapy, also known as light therapy, deals with treating skin diseases, such as psoriasis, eczema or other skin diseases, where UV-B light is used to treat the affected area. Dermatology clinics and hospitals around the world have this type of treatment, using either a small lamp or in full body cabins (“UV-B Lamps,” 2018). Another type of phototherapy treatment is to transform cholesterol into vitamin D3 by exposing the skin to UV-B light (“UV-B Lamps,” 2018).

Normally, this is not a necessary treatment if exposure to natural light is available, but in Northern European countries where daylight is scarce, pregnant women may receive such treatment in order for their babies to have enough vitamin D3 when born. This is also used in

herpetology where indoor reptiles need UV-B to produce vitamin D3 and strong bones (“UV-B Lamps,” 2018). The last type of UV light is UV-C, with a band spectrum of 100nm to 280nm.

It is mostly used in air, water or surface disinfection systems, biotechnology or sensing.

Disinfection where the UV-C light is used to kill microorganisms or bacteria (“Ultraviolet Germicidal Irradiation,” 2018). Such systems are the recent contributing factors to the growth of the UV LED components market, so for LED lighting manufacturers can focus on the bigger picture on life science and medical sterilization.

Table 4

Band Spectrum and Supported Applications for the Three Types of UV Light

UV-A UV-B UV-C

Wavelength (nm) 315-400 280-315 100-280

Applications application as the target is a wiser choice to penetrate and make it a second niche market. As the UV-A LED market’s curing system is already quite mature, along with the recent growth of UV-C LED market’s disinfection systems, these two application market are better to avoid for new entrants to the market. Therefore, targeting applications in UV-B’s medical phototherapy or UV-C’s medical sterilization is a better choice since both UV-B and UV-C LED lighting markets have yet been largely impacted by LED manufacturers due to the fact that LED technology in this two types is more difficult than UV-A LED. Hence, even though the technological barrier to entry is slightly higher, but the market is will eventually mature as UV LED curing market will reach a certain limit (“UV LEDs,” 2018).

The market size for both A and B LED lighting together is not as high as UV-A LED. There is currently no market estimate for the UV-B LED medical phototherapy in particular but the overall light therapy market is forecasted to reach USD 980 million by 2024 and it includes LED lighting (“Light Therapy Market Size,” 2016. As for medical sterilization, Figure 3 represents the market estimate growth of UV-C LED module by revenue from 2014 to 2020 (Shih, 2015). It shows that the medical sterilization market has been slowly growing over the years and by 2020, the estimated revenue will reach USD 110 million (Shih, 2015).

Figure 3. UV-C LED module revenue forecast from 2014-2020 for disinfection. Adapted from Emerging Applications for UV LEDs Drive Broad Interest, in LEDs Magazine, by M.

Shih., December 4, 2015, retrieved from https://www.ledsmagazine.com/articles/print/%20 volume-12/issue-11/features/strategically-speaking/emerging-applications-for-uv-leds-drive-broad-interest.html. Copyright 2007-2018 by PennWell Corporation.

Despite the smaller market size of UV-B and UV-C LED lighting market, there are still worthy reasons for targeting the medical phototherapy and sterilization markets, and marking it Energyled’s second niche market. Related technology to produce UV LEDs is not as complicated as starting something completely new since its engineers definitely have enough skills for developing new and better UV LED products. Whereas finding new potential customers is slightly more challenging due to the fact that this is a new area where Energyled

has yet to approach. Potential customers would be in the medical field, especially in the dermatology area for light therapy. This would include not only hospitals but also independent dermatology clinics. Other clients include biotechnology labs and companies with their own research labs that require medical sterilization. These potential customers span around the globe, which means that there are a lot of opportunities for Energyled to expand into. Therefore, the main objective is to find companies that use light tubes and lamps in their phototherapy or sterilization environment, with a target benchmark of ten percent of the potential market starting in Taiwan in the first year. Then in the following years, the benchmark will gradually increase when the products are being promoted internationally.

Competitive Analysis

The differences between traditional and UV LED lighting defines its advantages and disadvantages for which customers would consider whether or not to make changes to LED products. Acknowledging the growth in the LED industry in the past years, an increase of more than six times the number of original manufacturers has joined the industry in the past decade (“UV LED Market to Grow,” 2015).

UV LED products are almost exactly the same as general LED ones except the presence of UV ray. As shown in Table 5, LED does not contain mercury, or any hazardous item, in comparison to the mercury vapor composed traditional UV light. This defines its character as environmentally friendly, which is what governments drive for and hence the ban of mercury vapor lights by the year 2020. LEDs have a special design with heat sink that allows the heat to be dissipated quickly out of its confined shape. A good heat dissipation design saves unnecessary additional energy consumption. With the fact that it consumes low power wattage, it can be described as very energy efficient and guarantees lifetime. LED lights have long lifetime of up to 50,000 hours, much higher than traditional UV light’s 16,000 hours. Such long hours mean lesser number of times that the lamp need to be changed; hence its low maintenance cost. Yet, despite all the advantages, there are still two disadvantages, both related to cost. The first is the product cost. UV LED products is still considered to be in the early stage that there is no standardized specification so the cost can be lowered to nearly the same as traditional UV light. The second disadvantage is the installation cost. Installing or changing to LED products is not simply a direct replacement due to the difference in the end caps on both sides and the need to use adaptors.

19 Table 5

Comparison Table of Traditional and LED Types of Light

Traditional Light

Traditional

UV LED UV LED

Light source type Florescent,

incandescent Mercury vapor LED LED

UV ray Yes Yes No Yes

750~1,000 8,000~16,000 50,000 50,000

Maintenance Cost High High Low Low

Installation Cost Low Low High High

In the beginning of 2000s when UV LED development started, only a few companies were involved. They were companies from Japan, Korean and USA (Figure 4). Then with the success of UV LED curing systems over the years, more manufacturers entered the market, now with more than 60 companies (“UV LED Market to Grow,” 2015). All these companies manufactured LED components, or packages, for equipment developers. Of these companies, Nichia, Nitride Semiconductors, Seoul Viosys (or Crystal IS), LG Innotek and USHIO/Epitex take up bigger shares of the market (Figure 5) (Wu, 2017). Nichia is one of the earliest companies that researched and developed UV LEDs and has remained to be the leader in the market. Only Seoul Viosys has UV LED incorporated insect trap, air purifier and sterilizer.

Information on global UV LED lighting market is limited.

Figure 4. Evolution of the industrial ecosystem. Adapted from “UV LED Market to Grow from $90m to $520m in 2019,” by Semiconductor Today, 10(1), 80-81, retrieved from http://www.semiconductor-today.com/features/PDF/semiconductor-today_february2015-UV-LED.pdf. Copyright 2018 by Semiconductor Today.

Figure 5. UV LED suppliers by revenue, 2016. Revenue is referred to on the components level. Adapted from TrendForce Says Global UV LED Market to Expand at a CAGR of 34%

From 2015 to 2020 as Applications for Related Solutions Emerge, in TrendForce, by J. Wu, June 13, 2017, retrieved from https://press.trendforce.com/press/20170613-2880.html.

Most companies in the UV LED market only produce LED packages and not much of lighting products. Hence, a competitive analysis with UV LED companies that produce mainly components are conducted, as shown in Table 6. Although Energyled has not yet started to produce any UV LED products, the information provided is based on their target UV LED products and application market. And the rest of the factors from quality to advertising are the same as Table 3, which is based on the products and services that Energyled provide and its current situation in the area of marketing. Four companies that originated from three different countries around the world are chosen based on its brand, expertise and similarity in UV LED products. Of these four, two pioneer companies are compared to. One of which, SemiLEDs, originated from the USA but is headquartered in Taiwan. The other is one is the big brand Nichia, famous in the industry for its research and expertise in their products. Both companies focus purely on developing UV-A LED components and targets very similar markets. The main difference is their brand recognition and global distribution. The third company is the later joined LG Innotek which produces not only UV-A LEDs but also UV-C LED for sterilization purposes. With LG as its mother company, its quality, service and recognition is equally as good as Nichia, except the fact that it has more selection in their product line. Its quality and technical specifications of UV-C LED components are what Energyled need to compare and compete with most. Lastly, the fourth company, RayVio, is the only company that produces all three types of UV LED products and also sells modules. Although it is not a company that is much heard of, it seems to have the sole focus on the UV LED market such that it is already targeting all possible applications, including the medical phototherapy and sterilization fields that Energyled is approaching. This may be the main fact that RayVio will be the main competition for Energyled since Energyled also have other product lines to develop and support. Luckily, its weakness in the marketing area is similar to Energyled, so if Energyled improve greatly in this area, it can surpass RayVio in the UV LED market.

22 Table 6

Competitive Analysis of Energyled with Major UV LED Manufacturing Companies

Factor Energyled SemiLEDs Nichia LG Innotek RayVio

Origin Taiwan USA Japan Korea USA

UV Support UV-B, UV-C UV-A UV-A UV-A, UV-C All types

Product Light tubes,

lamps Components Components Components Components, modules

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