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LED suppliers target business, industry
FAYETTEVILLE ¡ª Christopher Callahan made his foray into the lighting industry two years ago.

As a merchandising director, Callahan investigated Chinese manufacturers of fluorescent light bulbs. His role was part of an effort that ultimately created the winning bid for Wal-Mart Stores Inc. ¡¯s private-label fluorescent bulb in 2007.

Through later market research, Callahan decided it was light-emitting diodes, or LEDs, a fast-growing, efficient technology ¡ª not compact fluorescents ¡ª that would make for a profitable business venture.

¡°We¡¯re at ground zero in the LED market in America,¡± Callahan said.

NextGen Illumination Inc., Callahan¡¯s business, is among the dozens of original design manufacturers seeking to introduce LEDs to the domestic commercial market instead of the residential market, partly because LED bulbs cost much more than fluorescents.

LED suppliers have targeted commercial or industrial power users since there¡¯s a shorter ¡°payback¡± period on the initial investment, insiders say. Cost savings related to the diode¡¯s longer life span are another financial advantage.

Federal legislation signed in 2007 could help LED technology take off since the act phases out traditional incandescent bulbs (a technology invented by Thomas Edison in 1879 ), over eight years beginning in 2012.

Incandescent bulbs use more electricity than LEDs ¡ª semiconductor chips that, when put into a diode and charged with electricity, give off light.

LEDs have been touted as lasting up to 50, 000 hours compared with 5, 000 and 8, 000 hours for incandescent and compact fluorescent bulbs, respectively.

The University of Arkansas at Fayetteville is among local commercial users accelerating industry growth of the estimated $ 4. 6 billion U. S. market.

The financial industry predicts LED technology sales will nearly double to $ 8. 61 billion in the next three years for ¡°high brightness LEDs,¡± which can be used in mobile applications, signs and displays or other electronic equipment, according to recent data from Canaccord Adams, a Vancouver-based investment bank. At UA, LED products from three vendors compete as part of the university¡¯s sustainability initiatives.

GREEN EXPERIMENTATION About 150 LED bulbs have been installed at the UA¡¯s Hotz Hall ¡ª a converted dorm that now houses several university departments and nonprofit services. Nick Brown, a UA executive assistant for sustainability, said the university is betting on saving money from all the LED lights installed at the school.

An LED streetlight fixture installed in a parking lot, for example, is expected to reduce energy consumption by 75 percent compared with wattage used by the current sodium vapor light, Brown said.

The university also expects to eventually get a return on the investment through lower maintenance costs and the technology¡¯s longevity.

While still untested, the LED streetlight technology will cost more on the front end: about $ 1, 200 for an LED light fixture, compared with $ 400 for a sodium vapor light fixture.

But LEDs are expected to last up to 10 years, compared with one year for a regular light.

¡°We¡¯re reducing energy costs and maintenance costs, and we¡¯re expecting a 10- to 15-year life span,¡± Brown said. ¡°LED looks very, very good.¡± Reducing electricity consumption through modified lighting is the lowest hanging fruit businesses can reach, said Jed Dorsheimer, an analyst with Canaccord Adams in its Boston office.

LED technology has been called a ¡°disruptive technology¡± since it¡¯s causing the entire lighting industry to rethink the existing market that is expected to produce fewer incandescent bulbs.

In March 2007, the Lighting Efficiency Coalition called for eliminating incandescent bulbs by 2016.

Philips Electronics, an Amsterdam, Netherlands-based lighting manufacturer, took the initiative in forming the coalition, a collection of several trade and environmental groups and legislators such as Sen. Mark Pryor, D-Ark., who seek to reduce energy consumption.

President Bush signed the Energy Independence and Security Act in December. The legislation calls for the phasing out of incandescent bulbs starting with 100-watt bulbs in 2012 and ending with 40-watt bulbs. It does not dictate specific replacement technology.

For the first time in 30 years, the industry is shifting direction, Dorsheimer said. The change is similar to when compact fluorescent bulbs started coming into the marketplace, he said. In commercial applications, the market is seeing adoption ¡°and volumes in the industry are driving down pricing.¡± COMPETITIVE ADVANTAGE LED technology is not ready for home use, Callahan said recently. Callahan and his partner, Jeffrey Beaver, argue that the average consumer is not likely to buy a $ 29 LED bulb for use in a fixture that¡¯s turned on a few hours a day. Not only is the comparative cost of LED bulbs high, the payback takes months and ¡°performance¡± remains questionable. ¡°There are hundreds and hundreds of people doing this out there,¡± said Callahan, who recently went to Hong Kong for a lighting trade group show. China is where a majority of lighting manufacturing takes place. LED companies are flooding the market with a product that has not been tested, he said, ¡°which is bad for the market.¡± However, the U. S. Department of Energy in late September issued an Energy Star efficiency standard for solid-state lighting, another name for LED technology.

The label is intended to instill consumer confidence that the products meet efficiency and performance criteria.

Dorsheimer said any type of labeling is a positive for the LED industry.

¡°We need to keep the bar high and inferior products don¡¯t get the label,¡± he said.

NextGen¡¯s bulb does not have the Energy Star appellation yet, but founders say their bulbs have at least two advantages over those of most competitors. The Fayetteville startup¡¯s flagship product is its ¡°universal¡± dimmable LED bulb that will work with any dimming switch. And the company is experimenting with the idea of recycling the bulbs. NextGen will reclaim the bulbs and replace the chip components inside, putting a new technology in the same lamp. Customers will pay less for the recycled product, Callahan said. ¡°We¡¯ll treat every bulb as a recyclable product and at the end of its life, we¡¯ll ask that it be returned,¡± he said. Dorsheimer said advertising recyclability is not that common, and that having ¡°dimmability¡± sets a product apart from the competition. ¡°The biggest challenge is getting the cost down,¡± he said.
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