the lighting revolution

1 •

The Lighting RevolutionSolid State Lighting – opportunity, challenges & the future

Sri JandhyalaMarketing Director – LED Lighting

ON Semiconductor

2 • Template • Nov-12 Confidential Proprietary2 •

THE OPPORTUNITY


2010 Electricity Consumption in the US for Lighting

Source: DOE MYPP, April 2012

• Lighting consumes ~20% of total electricity usage in the US • WW consumption is ~200 quadrillion BTUs; US consumes ~18%• LED Penetration was less than 1% in 2010


US Energy Consumption & Savings for Lighting

Source: US DOE , SSL Energy Savings Report, Jan 2012

LED Penetration @ 36%

LED Penetration @ 74%

• In 2010, the cost of an LED Bulb was >$60!!• Last year, Japan had 30% LED penetration

>> The point being – these projections are already looking very conservative


Government Regulations

Source: McKinsey & Co (2012)


Need for Efficient Solutions: Energy Security

Source: McKinsey & Co (2012)


The Potential

• LED A-lamps have less than 1% penetration of the total installed base of 3.3B A-lamps in the US

Source: US DOE , Adoption of LEDs in common lighting applications, May 2013


Global Lighting Market

Lamps – Annual Unit Shipments & Penetration - Annual shipments of 14B

units – declining to 10B due to longer lifetime of LED Bulbs

- All lighting technologies flat, except incandescents that will decline

- LED experiencing explosive growth and capture 25% share by 2017

Source: Datapoint, ON Semiconductor Internal Estimates


Global Lighting Market

- Huge installed base of 40B units and growing

- In 2016, annual units shipped of LED lamps will surpass cell phones

- Even with 6B units shipped over the next 5 years, LEDs will only have ~10% penetration

Lamp Sockets – Installed base by Lighting Technology

Source: Datapoint, ON Semiconductor Internal Estimates


World Wide LED Lighting – Total Market Size

• Global Lighting Market is growing and will be $125B USD in 2017

• The General Lighting segment will be the biggest driver, by far

Eur

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Source: McKinsey – Lighting the Way


LED Market is Rapidly Evolving

• Lighting accounts for ~1/5th of total electricity world-wide– With the adoption of technology available today, 30% can be saved

• Beijing has set a target for LEDs to account for 30% of total general lighting market by 2015– Estimated to cut annual coal use by 35 million tons

• Japan already has 30 percent LED penetration

• Phaseout of incandescents in the U..S started in 2011– Energy Independence and Security Act of 2007– GE shut down last factory making incandescents in 2011

• IKEA will sell only LED lighting products starting in 2016


Strong Fundamental Drivers of LED Lighting

• Overall lighting demand increasing– Population growth– Urbanization

• Need for more efficient solutions– Carbon emissions– Energy security – Japan has been 1st mover

• Rapidly falling cost of LEDs and lamps– <$10 is viewed a key tipping point in developed markets– Over-supply in LED capacity has helped


THE CHALLENGES


Disruptive InnovationFrom the Innovator’s Dilemma by Clayton Christensen

• A disruptive innovation initially offers “lower performance” as measured by the mainstream market

• But, it also offers other features/benefits

• As it improves along traditional metrics, it eventually displaces the incumbent

• History is littered with examples playing out over and over– Telegraphy to telephones– CRT to LED TVs– Land lines to Mobile– And now, incandescents to Solid State Lighting


Where are We in the LED General Lighting Adoption Curve?

Source: Morgan Stanley, 2011

• Volume surge

• Smaller, niche applications – ala Smart Lighting

• Industry profit growth slows

• Cost still high

• Demand needs to be created

• Highly fragmented market with many new entrants


“Lamps”

A-lampStandard incandescent Linear Fluorescent Compact Fluorescent (CFL)


Equivalency – in lumen-hours

Source: DOE LED Lifecycle Report, 2012

• Average output of a 60W incandescent lamp is 900 lumens• 1 LED Lamp provides 800 lumens and 25K lifetime hrs 20 million lumen-hours


The Retrofit Lamp• Performance is critical – manufacturers

adopted voluntary/regulatory standards

• Quality is key – lifetime warranties being offered

• LED’s are changing rapidly – redesign is common

• Many applications are regional specific requiring optimization

• Smart Lighting adds further complexity

Courtesy: IEEE Spectrum


The LED replacement/retrofit lamp


The CREE LED Retrofit Lamp

• Total of 20 LEDs mounted in ten groups of two• Four LED die in each package for a total of 80 LEDs in series• Mounted onto a metal core PCB bent into a ten-sided shape


LED Bulbs Reach Tipping Point in 2014

Aggressive Market Price Reductions in LED bulbs in the US

Source: DOE MYPP 2013, Datapoint

2013: CREE 60W bulb @ $12.97

2013 Retail: $14.97

-40%

LED Bulb Efficacy Improvement

Dramatic improvements recently and more projected before reaching theoretical LED limit of 268 lumens/watt

Efficiency improvements driving Cost reductions

LED Cost ($/Klm) Improvement

CREE 60W bulb @ $16/Klumen

$5 for a 60W bulb in 2020

Anticipate “tipping point” when LED bulbs reach <$10


Barriers to adoption

• Awareness and education of SSL

• Cost

• Performance has reached levels matching incumbents– Continuous monitoring and voluntary standards

• Quality across manufacturers has to be maintained– Back-up claims – Warranties being offered– Lifetime, Color quality, light output, etc

• Higher initial cost still remains a hurdle – especially in Asia– Multiple drivers helping

• Standards – Requirements are very regional– True inter-operability


THE FUTURE


What’s Next?

• Growth in the replacement bulb market will slow down

• So far, its been all about energy savings– Driven by governmental regulations and policies

• In the future, it will be about new and innovative uses– Smart Lighting– Occupancy/Motion sensing


• “Bulbs get most of the attention due to the sheer size of the market, and this is an important step in adoption. However, bulbs will be a bridge solution and a Trojan Horse for a more sustainable content driven, networked, intelligent market”

• “In the near future, adoption of SSL will have little to do with energy efficiency” – CANACCORD Genuity

• Lifetimes, efficiency, energy star and the EPA do NOT matter– Vinod Khosla, Khosla Ventures


Market (R)evolution

• Drive for energy efficiency and tops-down push aiding SSL adoption• The volume & opportunity today is in “General Lighting” – Retrofits • “Smart” lighting will start to grow significantly in 1-5 years

- Driven by the “internet of things” & command/control

• Color / CCT Control• Spectrum Shaping• New applications /

uses


“Smart” Lighting – The next catalyst

Source: Datapoint & ON Semiconductor analysis and estimates (2012)

TodayEmerging in volume – on the market today

• SSL opens up new features– Occupancy, Ambient, Proximity sensors built into bulb– Wireless (Bluetooth, Zigbee, Proprietary)

• Products are on the market now


A few possibilities for the coming years

• Occupancy and motion based controls• Detection of your presence – and customized lighting• No more “fixed” lighting• Walls “painted” with different colors• Multiple light sources in a room – ala the automobile• No more light switches• Completely new form factors – paper origami fixtures• Individually addressable lamps can become a gateway• No longer about illuminating spaces alone – about lifestyles• “Adaptive learning” – machine learning similar to annoying

internet ads; Naturally setting the personalized light


In Closing…..

• It’s a matter of when, not if – and the opportunity is huge!!

• So far the driver has been energy savings

• As penetration increases, newer uses of lighting technology will accelerate

• Many more new applications and uses for lighting will emerge

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