LED ARTICLES
Lighten
Up
Bob
Johnstone, 10.17.05
China wants to go easy on energy by
using LEDs. For now that means a lot of imports.
At a recent investor conference in
Boston, Silicon Valley's Robert C. Walker asked his audience a
trick question: Is China (a) a land of 800 million poor
peasants, (b) a giant factory with plentiful cheap labor, or
(c) the bleeding edge of the solid-state lighting
revolution?
The answer is, of course, all
three.
The revolution he refers to is the
transition, now under way, from Edison's lightbulb to tiny
chips called light-emitting diodes (LEDs). It began with niche
applications such as traffic lights and displays like the
Nasdaq screen in New York's Times Square. But industry experts
predict that energy-efficient LEDs will sooner or later sweep
away all other forms of lighting, up to and including household
lights.
"China will be the first country to
adopt the solid-state lighting revolution," Walker says.
"You're going to see China first, the rest of Asia second,
Europe third and the U.S. last in adopting that technology." A
bold call perhaps, but as the chief executive of ELite
Optoelectronics, a Sunnyvale, California supplier of LEDs, and
a senior adviser to the Chinese government's solid-state
lighting committee, it is one that Walker is qualified to
make.
China's government has pressing
reasons for embracing solid-state lighting, which in the West
is still a fringe technology. Prime among them is the fact that
LEDs will consume roughly 50% to 80% less energy than
conventional (incandescent and fluorescent) lights.
Rapid economic growth is already
outstripping China's ability to supply energy. According to Wu
Ling, the dynamic former medical doctor who directs the China
Solid-State Lighting Alliance, a Beijing nonprofit organization
that develops strategy for the government, 12% of electricity
currently goes to lighting.
Wu estimates that if over the next ten
years LEDs were to take 30% of China's lighting market, then
the saving would be 58 billion kilowatt-hours per year. She
points out that that is almost as much as the yearly output of
the Three Gorges Dam, the world's largest power plant, under
construction at a cost of $24 billion.
"Faced with a great shortage of
energy, the government will push solid-state lighting," Wu
says. And in China when the mandarins want something to happen,
they have all sorts of ways of making sure that it
does.
Top-down strategies include financing,
both direct and indirect. Wu expects Beijing's next five-year
plan, to be announced at the end of October, to contain a major
increase in spending on solid-state lighting R&D at Chinese
universities and national institutes (up from the $17 million
spent since the project began in January 2003).
Wu estimates that $725 million has
thus far been invested in China's domestic solid-state lighting
industry. Some of this is private investment, but industry
insiders believe much of the money has come from government
banks in the form of soft loans to LED startups.
Regulations--in both positive and
negative forms--are another powerful lever. For example,
officials can mandate that LEDs be used for certain
applications, such as the illumination of tourist landmarks
like Beijing's Tiananmen Square. Or, where the codes haven't
caught up with technology, authorities can turn a blind eye to
early adoption.
"China is different, in terms of
regulations," says Bingwen Liang, chief executive of Nanjing
Handson Semiconductor Lighting, a leading LED packager and
fixturemaker. "It's not so tight as in Europe or the U.S. As
long as you have good relationships with the leaders, anything
can happen."
Also auguring well for the rapid
take-up of new lighting technology, Wu points out, is that
China's infrastructure is still a work in progress. "The whole
country is like a construction site," she says.
"In the U.S. I'm not going to go to
the Marriott Hotel and have them change their whole electrical
system," Walker explains. "In China I get to go to a guy who's
building a new hotel and say, ‘Design your building around
LEDs.'"
In particular, the country is
scrambling to prepare for the Olympics in Beijing in 2008.
These are billed as environmentally friendly games. (Of
necessity: It would be embarrassing if the city's appalling air
quality were to affect the health of athletes.) LEDs are among
the officially designated environmental
technologies.
The Olympics are also an opportunity
for China to show itself off to the world. And it is in
colorful outdoor decorative lighting rather than
general-purpose white illumination--the implementation of which
remains several years off--that the solid-state revolution has
initially been manifesting itself.
"The whole country's gearing up for
the Olympics, not just Beijing. They expect a lot of foreign
tourists all over China," says Robert V. Steele, an analyst at
Mountain View, California market researcher Strategies
Unlimited. "They want to dress up the country, and they see LED
lighting as a key element in improving the appearance of
buildings, bridges, fountains and ancient sites."
For example, the Full Moon Tower, a
52-meter [170-foot] structure in Galaxy Park, Tianjin's civic
center, is illuminated at night by a dazzling
computer-controlled colored light show. City officials decided
on an illuminated landmark to help raise the profile of
Tianjin, a port city of 10 million inhabitants about 200
kilometers southeast of Beijing.
In urban centers across the country
the story is the same. "Every single local government is trying
to do this kind of thing," says Xiao Guang He, executive vice
president of Dalian Lumei Optoelectronics, China's
second-largest LED maker. "If one lighting project turns out
good, then people just keep on copying. And the cost is now so
low that people can afford it."
Outdoor decorative lighting accounts
for almost a quarter of the Chinese LED market, which was worth
$1.4 billion in 2004. In southeastern China's Fujian Province
alone, according to Xiao, consumption of white LEDs is running
at 500 million a month. Currently most of the LEDs and fixtures
used in China, especially the high-end ones, are
imported.
Companies such as Cree (U.S.) and
Nichia (Japan) provide the LED chips, while architectural LED
fixtures are supplied by firms like Boston's Color Kinetics and
Vancouver's TIR Systems, which was responsible for lighting up
Tianjin's Full Moon Tower.
Per annum the LED market is growing at
40% in terms of units and 23% in sales. It is serviced
domestically by some 600 firms employing as many as 40,000
workers; almost all are small outfits at the low end of the
industry, doing labor-intensive jobs such as packaging LED
chips.
But the Chinese are determined to work
their way up the value chain. Already four Chinese companies
have begun to produce their own chips, with maybe twice that
number gearing up to follow. Xiao's company, Lumei, leads the
field, largely thanks to having acquired the optoelectronic arm
of AXT, a U.S. firm in Fremont, California, for $9.6 million in
2003.
For the moment Lumei continues to make
its LEDs in California. But the technology is migrating across
the Pacific, carried to the mainland by returning Chinese-born,
American-trained engineers. Xiao, for example, formerly worked
for U.S. lasermaker Spectra-Physics. Liang of Nanjing Handson
spent seven years at HP-Agilent.
And though they may be late starters,
the Chinese can draw inspiration from the success of their
archrivals, the Taiwanese. The island has rapidly made itself a
force to be reckoned with in LEDs. Steele reckons that around
40 Taiwanese companies now manufacture LEDs, including Lite-On
Technology, a member of FORBES ASIA's new Fabulous 50 list of
top-performing bigger corporations (Oct. 3).
"Four years ago, when I was telling
people about Taiwan and LEDs, everyone pooh-poohed me," Bob
Walker says. "Now nobody talks about this industry without
mentioning Taiwan." The same will soon be true of the
mainland.
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