Market Leaders Emerge in 2014

2014 is the year in which market leaders will emerge in the LED light bulb business. All the big players know that A19 light bulbs are the big play here.

While niche markets in lighting can have hundreds of millions of units, A19s are billions of units. So the winner here is going to have the clout eventually to take over the niches.

You might note that I said "market leaders in LED light bulbs" -- not "market leaders in light bulbs." In 2014, LED light bulbs are going to remain a tiny fraction of the light bulb market, not visible on a pie chart. That won't change until 2015. If ever.

Three categories

Up until now, there have been dozens -- hundreds, if you include Chinese companies -- of competitors in the LED light bulb market. We can separate them roughly into three categories:

1. Wretchedly bad bulbs -- those which don't produce the light their label says, fail within a couple of months, and look stupid;


2. Really bad bulbs -- those which have poor light color, quality, and directionality, claim a three-year warranty with no data to back it up, and look stupid; and


3. Bad bulbs -- those which have passable light but don't dim very well, cost too much, and look stupid.

Passable

In 2014, we're going to start seeing a new category:

4. Passable bulbs -- those which have the right amount of light of a reasonable (but still not good) color, reasonable omni-directionality, enough testing to ensure a three-year lifetime, passable (but not good) dimming, and -- physically look stupid.

Not all manufacturers are going to have them. The market is going to start segregating into those that have them, and everyone else who is still stuck in categories A though C.

These few nascent market leaders are going to have volumes in the tens of millions in 2014. That's still not enough to show up on the pie chart, but it's enough that they can start showing a profit if they're selling at positive margin. If they're selling below cost, they can politely go out of business, or at least get out of the business.

Market leaders

Here are my guesses for the market leaders by the end of 2014. (The year-ago market report from Groom Energy and Greentech Media, "Enterprise LED Lighting 2012," agrees that my first four choices here were the market leaders in 2012.)

1. Philips. They have shown consistent willingness to do whatever it takes to be in this market, have just introduced a bulb that looks to be in category D, and have deep enough pockets to lose tens of millions of dollars without going out of business.


2. GE. They're still going to be stuck back in category C all of 2014, but are part of the deep-pockets crowd.


3. Cree. They also have a bulb in category D, and they have the (temporary) advantage of not having to pay margin to an LED manufacturer. Their bulb is still ugly. I don't know what their margin is like, but they can probably survive losing tens of millions of dollars -- for a while.


4. LSG. They currently have significant shelf presence, both under their own name and private labeled. They're in Category C (and their bulbs look most especially stupid). They probably have enough cash to last through 2014 -- but if they don't do some radical cost reduction, they'll be gone in 2015.

Finally, as a long shot I pick:

5. Switch Light. They have a bulb (the Infinia) that has the right light, an OK price, a lifetime warranty, and is approaching good looks. I think they're close to being in a new Category E: bulbs that are ready for primetime. They don't have any volume yet, and can't afford to lose money -- but just maybe, if they do everything right, they'll be one of the market leaders going in to 2015.

Disclaimer: I was one of the founders of Switch, and have a financial interest in it.

[Note: neither the author, All LED Lighting, nor UBM is offering investment advice, and none take any responsibility for what readers may do with information presented in this or any blog. -- Ed.]