The Brightest Idea About LED Lighting

Even the boldest entrepreneurs will take a wait-and-see attitude toward a virgin market, which may only arrive in more than a decade. Not Jason Wu, who put his chips on brighter light-emitting diode (LED) lighting with the founding of Edison Opto in Taiwan in 2001.

Introduced as an electronic component in early 1960s, LEDs are only now being widely commercialised to replace incandescent and neon lamps.

Most recently they’ve become a backlighting source for electronic appliances. But that mostly just requires medium power of half a watt.

Coming: High-power application of above 20 watts, used in street and household lighting, such as is required by new energy-conservation laws. One of its advantages is that LED comes in a smaller size, but emits more light per watt than an incandescent bulb.

Taiwan’s LED sector was early to develop, but it was a long stretch before technical breakthroughs would allow semiconductors to be driven by higher currents so as to enhance illumination. High-power LEDs, Wu and other pioneers believe, will eventually become the mainstream source of general lighting, both indoor and outdoor, professional and recreational.

“We’ve taken a road less travelled … to challenge a future market,” says the 42-year-old chairman and CEO, who named his company after American lightbulb inventor Thomas Edison. “Our specialisation in [LED] general lighting has allowed us to, most of the time, be the first mover in Asia to grab [new] market demand, which enjoys high margins, before rivals follow to drive up price competition.”

Although it trails global rivals like Luminus Devices and Cree in sales, Edison remains the largest high-power LED manufacturer in Taiwan and was the first in Asia to shoot for general lighting uses. LED ‘packagemakers’ like Edison mount LED chips, acquired from their collaborative suppliers, directly onto substrates, leadframe or circuit boards and supply the lenses and capsules that protect the chips while attaining brightness and efficiency.

The company tripled revenues and net profits in three years to $100 million and $16.4 million, respectively, in 2010. That, together with average gross margins of 30 percent, has put it on Forbes Asia’s 200 Best Under A Billion list for two consecutive years.

But technology—and particularly novel technology—is a bumpy business. As a result of oversupply, which deeply cuts the prices of packaged LEDs, Edison saw an 18.5 percent year-on-year decline in sales to $75.6 million in the first 11 months of 2011.  Lower prices, however, can also mean a vastly larger market in only a few years, roughly five times the current $7.6 billion. For Edison Opto, that will be a big enough market to be excited about. “A 5 percent to 10 percent market share will be more than we can chew,” Wu says.

Although the company opened plants in Dongguan and Yangzhou, China in 2006 and 2009, respectively, it has selective aims on the mainland as elsewhere. It has no intention either to contract manufacture for international brands or to compete head-to-head with them, Wu says. “For business leaders, it is sometimes more important to decide what not to do than what to do,” says Wu, adding that he has resisted pressure from his board of directors to enter the LED backlight market for short-term gains.

Instead, Wu aims to supply the guts of high-power lighting systems.

“Our branding strategy is to promote the concept of Edison Opto inside,” much like the ‘intel inside’ campaign in microprocessors, he adds. As China goes big on LED manufacturing, the mainland plants will be able to maximise capacity of high-power LEDs at 50 million units a month—the largest in Asia.

Wu says he’s confident the company’s R&D capabilities can lead to doubling shipments next year, just as Edison’s earlier LED components used in star products—torches for coal miners in China, professional lighting for concerts and exhibitions, as well as LED street lamps—put it ahead of the pack between 2005 and 2010.

Out of its total staff of 1,000, the 60-member R&D division faces the most demanding tasks. “We are given a very short learning curve,” the division’s deputy manager, Tim Chuang, 28, says.

For example, he was once asked to churn out samples of a lens in three days, using a newly installed advanced device he’d never worked with. “That type of challenge often forces you to seek more company resources or resort to teamwork so as to deliver,” Chuang says.

The chairman says Edison, unlike its peers, has no hesitation in honing its R&D talent by flying a score of them, along with himself and Edison’s chief technology officer and co-founder, Calvin Sun, to international lighting fairs to stay ahead of market cues and close to market pulses.

Seizing opportunities is his way at work and in life, Wu says. Born into a big, poor family from the offshore island of Kinmen, Wu lost his father and one of three uncles at age 4 when both went missing on a fishing trip. “My earliest memories start with those days when people from our village cried for lost loved ones,” he says, “but I don’t remember much about my father, whose body has never been found to this day.”

Wu grew to be a “mature, hardworking and responsible person, living a self-disciplined life,” says another uncle, Wu Hsiang-kun, who partially funded his nephew’s college and graduate studies in chemistry.

Wu worked his way through college as a newspaper boy in the morning and as a 12-hour night-shift temp at a fabric dye factory during summer and winter vacations. “Each night I had to carry and bundle up more than 10,000 kilos of [dyed] fabric so that my hands were both discoloured,” he recalls.

After a short stint in pharmaceuticals, Wu joined the R&D division of Everlight Electronics, now the largest LED packagemaker (revenues) in Taiwan.
 
There he met Sun, and both urged the company to study the high-power LED market’s potential—but Everlight was busy competing in the cut-throat backlighting market. The pair left for their startup a decade ago.

Now a father of two, Wu emphasises a disciplined life for his son and daughter by asking them to scrub toilets every Saturday so that they learn to “be patient and stay low” before they can go on to brighter futures.


Falling Prices, Rising Use
Estimates of LEDinside, an industry data source in Taipei, show average selling prices for high-power LED components have plunged 43 percent in one year. To cite a simple measure, the cost of an LED alternative, now $15 to $25 each, to a 40-watt incandescent bulb could fall to $10 to $15 in coming quarters, according to Roger Chu, research director of green energy at LEDinside. He expects stiff price cuts to continue in coming years.

Dropping prices surely hurt manufacturers’ near-term revenues and margins. But they could also spell great news in the long run to accelerate the pickup of the LED lighting market globally, where pricing is the most important trigger for end consumers to switch. And there’s a way to go: That $10 LED light is still up against a $1 traditional bulb.

At its current efficiency level a good-quality LED bulb consumes 8 watts of electricity to emit 460 lumens—similar to the brightness from a traditional 40-watt incandescent bulb—and is thus five times more power-efficient. Also, it claims a maximum lifetime of 30,000 hours versus 1,000 hours of a traditional bulb, Chu adds. Many countries will completely ban low-efficiency incandescent lighting before 2015, but the LED light replacement wave will take time to realise as consumers resort to cheaper energy-saving alternatives such as compact fluorescent lamps at $3 for each 40-watt unit.

Overall, LEDinside projects that the global LED lighting market’s annual output (auto lighting excluded) will grow to $36.6 billion in 2015, or a third of relevant illumination, from this year’s $7.6 billion. —J.H.