Philips launches its first mainstream LED light

The Netherland's Royal Philips Electronics (NYSE: PHG) launched its first mainstream LED lighting product this week, a down light for recessed lighting being marketed as the Calculite line.

The line is expected to generate $20 million in sales in 2009 in the U.S. alone, said Zia Eftekhar, the CEO of Philips Lightolier, the division of the company overseeing the product.

The significance is that Philips, the world's No. 1 lightbulb maker, has shown confidence that the price of LEDs has now dropped enough to make the most technologically advanced lighting sector into one that’s affordable.

“Philips has a large collection of LED products, including a number of products for exterior usage and applications, products for changing the color or enhancing buildings, and products that have a shorter usage expectancy, such as theatrical mood lighting,” Eftekhar said. “This is our first LED product for the mainstream that has the potential to be sold in the hundreds of thousands, not just sold in batches of 10s and 20s for a specific project.”

The product, launching across the globe this week, is being sold with a five-year warranty—notable because it’s beyond the one- or two-year warranty that most LED makers offer, Eftekhar said. The significance of the five-year warranty is that Philips is guaranteeing the LED and components to last for 50,000 hours. Philips says its Calculite LEDs are 80 percent more efficient than incandescent lighting, and 40 percent more than compact fluorescent bulbs.

The LED market was about $4.6 billion in 2007 but could jump to more than $11 billion in 2012.

Philips is betting on LEDs as a significant part of its future business. The Philips Lightolier division spends 40 percent of its budget on R&D in the sector, Eftekhar said.

“It will become an extremely important part of the sector as we move forward,” he said. “It’s right now a single digit part of the industry’s total output. Without any question we believe it will be a double digit part of our sales and the industry’s sales within three to five years.”

Philips Lightolier became part of the global corporation in January 2008, when Philips acquired Louisville, Ky., lighting fixture company Genlyte for $2.7 billion (see Philips buying lighting maker Genlyte for $2.7B). Lightolier and Bairnco merged in 1981 to create Genlyte.

Although LEDs hold significant promise, many haven’t performed as well in real-world applications as in laboratories when it comes to the lumens per watt.

One drawback of LEDs is that it’s difficult to produce a white light without reducing the energy efficiency of the product. Typically, LED makers combine various colors to produce a white light, or add phosphor to the LED chip to make the blue light become white. The phosphor on the chip causes the rays to bounce back, creating heat instead of light and reducing the efficiency.

Philips uses a patented remote phosphor technology, which transmits the light through a layer of phosphor material, a step that improves energy efficiency by 20 percent compared to other white LED lights, Eftekhar said. Philips also designed an optical system to maximize the bouncing of rays, and a patent is pending.

LEDs in laboratory testing perform significantly better than those in the field. In part, that’s because the weakest link of most LEDs is the system behind it, which can zap energy efficiency through heat management and other processes. Eftekhar said Philips designed a system to manage heat extraction and light output efficiently.

“It’s designed from scratch as a solid-state product. It all operates as a single system rather than bunch of components that different manufacturers sold, which has typically been how it’s done in the lighting industry,” Eftekhar said. “Before recently, the lighting industry acted as components industry, and now we are becoming a systems industry.”

Philips expects to sell between 75,000 and 100,000 in the Calculite line. Philips plans to offer the lights at 3,000 Kelvin, which is warmer lighting more typical for a home or office but is less energy efficient, or 4,000 K. The products are wet-location listed by Underwriters Laboratories.

The LED system draws about 18 watts to produce 1,100 lumens, compared to about 33 watts to get a CFL to make 1,200 lumens. Philips declined to release the cost per bulb. Most of the component manufacturing and all the assemble work is expected to be done in the U.S. for the North American product.

The Calculite line is first being sold to fulfill projects for commercial customers, including architectural, lighting, design and engineering firms. It’s expected to be used in commercial applications such as offices, lobbies, hotels, and colleges where lighting typically runs 10 to 12 hours a day, where the payback is sooner.

Of the 420 million installed down lights in the U.S., about 150 million are in the commercial sector. Because lighting in commercial buildings typically runs 10 to 12 hours a day, it’s easier to make a financial case to commercial customers because of the quicker payback, he said.

A consumer LED down-lighting product is expected before the end of the year, with a goal of reducing the price 30 percent to 40 percent by lowering the optical specs, he said. Early next year the product is likely to be available in retail stores.