2013-10-29
Moving Downstream
Value, and profit, in the SSL ecosystem, will increasingly come from higher-level and more abstract benefits than the energy savings that has been the selling point in its early phases
This was one of the repeated messages attendees heard from the speakers at the LEDs and the SSL Ecosystem 2013 conference in Boston.
Early in the program, we heard from Jed Dorsheimer, managing director and senior research analyst at Canaccord Genuity. This Toronto-based investment bank has been involved in the SSL industry for 15 years, and claims to have funded 70 percent of the companies now working in the ecosystem. By Canaccord's reckoning, lighting represents the third wave of LED exploitation (some say it's the fourth): First came mobile phone screens, and then LED televisions.
Dorsheimer took us through the now-familiar territory of "socket saturation." This is what happens when most of the world's old-school light bulbs have been replaced by solid-state lighting: LED lamps last so long that the replacement bulb market will essentially wither away. Canaccord puts the date of peak incandescent replacement at 2017, and by 2020, saturation will have set in. The replacement market may be 14 billion sockets strong (we heard several different numbers from other speakers), but it is finite.
Where does the industry go after socket saturation? Downstream. The opportunities for profit are in the direction of software and applications. Just when the lighting industry was beginning to come to grips with the reality that it suddenly was in the semiconductor business, the accelerating technological change is fostering the growing awareness that it really wants to be in the software business.
The real transition
Dorsheimer believes that this rapid and unsettling transition has a very substantial upside. He argues from history. When cellphones became smartphones -- when the ancient analog business of circuit-switched audio began to go digital with a vengeance in the early 2000s -- the total addressable market expanded by a factor of about 10.
As of 2012, the number of "things" -- devices -- connected to the Internet reached about 10 billion, more than the human population of the planet (the crossover point occurred in 2008). And, of course, the Internet of Things is growing at a far faster rate than that of the collection of humans it serves. It's not unreasonable to suppose that the IoT could number in the tens of billions by the next decade, helped along in a major way by some of those 14 billion sockets becoming addressable and intelligent.
At this scale, the data produced by this vast interconnected network contains far more value than is conveyed by whatever the initial purpose of the individual devices was. (Ask the NSA about "metadata.") In the 2020s and beyond, this is where the SSL ecosystem will look to find value and profit.
Related links
— Keith Dawson 
, Editor-in-Chief, All LED Lighting