Future of Lighting Plays Out in Iowa Town, Global Courts


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Light-emitting diodes (LED's)

Light-emitting diodes (LED’s)

Light-emitting diodes (LED's)

Incandescent light bulbs, fluorescent tubes, high-pressure sodium lights and even the backlighting of some television sets will be replaced by light-emitting diodes, or LEDs, in a transformation of lighting technology. Photo: Hannelore Foerster/Bloomberg

Incandescent light bulbs, fluorescent tubes, high-pressure sodium lights and even the backlighting of some television sets will be replaced by light-emitting diodes, or LEDs, in a transformation of lighting technology. Photo: Hannelore Foerster/Bloomberg

Pocahontas, Iowa, population about
1,700, is on the cutting edge of a tech revolution. It replaced
all 280 of its street lamps with semiconductors that convert
electricity into light.

The old yellowish lamps now shine a brighter white and use
about half the electricity, which should let the $190,000
investment pay off within four years, City Administrator Robert
Donahoo said in an interview.

“The citizens love them,” he said.

Pocahontas is on the vanguard of a transformation in
lighting as incandescent bulbs, fluorescent tubes, high-pressure
sodium lights, and even the backlighting of some television sets
are gradually replaced by light-emitting diodes. Phone and
computer screens, Audi AG’s “eyebrow” headlights, and traffic
signals all use LEDs.

It’s become a gold rush for LED makers. It has also spawned
patent lawsuits around the globe over inventions that make
lights brighter and more economical. In the U.S., patent-
infringement suits involving LED technology have been filed in
Connecticut over custom headlights, in Florida over marine
lighting, and in North Carolina over motorcycle accessories.

Transforming Business Model

“LEDs are transforming the whole business model for
lighting from one that’s based on replacement to one that’s
based on installation,” said Eric Bloom, a London-based senior
analyst for Pike Research specializing in smart building
technologies.

Because LED lighting can last for 30 years, “getting in at
the get-go is absolutely crucial for the lighting market of the
future,” he said.

The largest battle pits Siemens AG (SIE)’s Osram unit against
Korean electronics makers LG Electronics Inc. (066570) and Samsung
Electronics Co. Each is trying to block the other from bringing
their LEDs into the U.S. through four trials in Washington that
began April 26. Lawsuits also are pending in Germany, Korea,
Japan and China.

The contested technology among the three also includes LEDs
that are used in televisions to create the light for liquid
crystal displays. They reduce power consumption, improve
longevity and enable TVs to be as thin as a tablet computer.

‘Lot of Money’

“These are new markets, new products and a lot of money is on
the line,” said David Radulescu, a patent lawyer with Quinn
Emanuel in New York who has represented LED companies for more
than a decade. “Companies want to protect their investments and
their market.”

Another case, at the U.S. International Trade Commission,
was filed by Litepanels Inc., a California-based unit of British
broadcast-equipment maker Vitec Group Inc. that made the
lighting for the press briefing rooms at the White House and
Pentagon. It’s trying to keep Chinese competitors out of the
U.S. market.

“As the popularity and goodwill associated with
Litepanels-branded lighting systems has grown, so too has the
number of foreign and U.S.-based operations that try to
capitalize on Litepanels’ investments,” the company, which won
a 2009 Emmy award for engineering, said in the ITC complaint. A
trial is scheduled for June in Washington.

The market for traditional home lighting, currently about
$12 billion a year, is projected to fall to about $5 billion as
LED lights can last for decades. They’re expected to replace
incandescent bulbs, which are being phased out in most developed
countries, and compact fluorescent bulbs that have environmental
concerns, Bloom said.

Edison’s Extinction

Royal Philips NV, Osram’s larger competitor, has projected
that LEDs will expand to about 45 percent of the lighting market
by 2015. GE, whose founder Thomas Edison invented the first
mass-marketed incandescent bulb, forecasted in December that
LEDs will represent about 70 to 80 percent of the general
lighting market by 2020.

Siemens, Europe’s biggest engineering company, is planning
to spin off Osram, which had sales of 5.03 billion euros in the
year through Sept. 30, so the unit can better expand in the LED
market. Munich-based Siemens is expecting the LED market to
increase to 9.8 billion euros ($13 billion) by 2013 and the
total lighting market to rise 44 percent by 2016.

“Companies are spending a busload of money on RD and
manufacturing, trying to drive costs down, and marketing,” said
Chris Nye, vice president of sales and marketing at Leotek, the
Milpitas, California-based unit of Lite-On Technology Corp. (2301) that
made Pocahontas’s streetlights. “Everybody is betting on LEDs.
There’s a perception that if you’re not in this now, you’re
probably too late.”

83 Percent Less

Osram’s patents asserted against LG and Samsung include
ways to make the LEDs less susceptible to extreme temperatures
that can degrade the quality of light, the structure of the
semiconductors, and ways to enhance the light emission. LG and
Samsung have each accused Osram of infringing patents that cover
ways to make the fabrication process more efficient and the LEDs
more reliable.

Improving the quality and efficiency of LED manufacturing
is important because the biggest impediment to widespread use
has been cost. Philips introduced a LED light to challenge the
energy of the 60-watt bulb, hoping consumers will pay the $60
cost because it uses 83 percent less electricity and will last
three decades.

Pocahontas, which has a $5.5 million annual budget, was
able to afford the upfront cost of new streetlights only because
it received $81,000 in U.S. funding under President Barack Obama’s 2009 economic-stimulus plan.

Recouping Investment

Donahoo said that, between the lower electricity and labor
costs, the town will recoup its share of the cost in four years.
It’s working on replacing the fluorescent lighting in its
maintenance garage.

“Our community is pretty progressive and most of Iowa in
general has bought into the idea that energy efficiency is
good,” Donahoo said.

LEDs, which are a type of semiconductor, have a rule of
thumb called Haitz’s Law for becoming exponentially more
efficient and affordable over time.

“It’s going to be something that’s going to change our
lives in many ways that are unforeseeable and limited only by
the human imagination,” said Frank Luchak of Duane Morris in
Cherry Hill, who represents companies that own LED technology.
The litigation “really is indicia that the LED industry has
come of age because now there’s a lot to fight about.”

To contact the reporter on this story:
Susan Decker in Washington at
sdecker1@bloomberg.net

To contact the editor responsible for this story:
Bernard Kohn at
bkohn2@bloomberg.net

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