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MONDO ARC

Europe needs to invest to compete

Issue 65 Feb / Mar 2012


The European Lighting Industry - a dying has been or the leading innovators of the future. The EU believes the latter... do you? Our LED expert Dr Geoff Archenhold reports.

Welcome to a new dawn and a new year! 2012 is set to be a big turning point in the lighting industry with key events taking place that demonstrate on a world stage the best that Solid State Lighting can offer: the London Olympics, the Queen’s Diamond Jubilee and of course the world’s largest lighting show - Light & Building.

Unfortunately, it’s not all good news for the lighting industry as some of the goliaths of the past 100 years struggle with both the new economic financial crisis, shifting global economical power to Asian based businesses and the rapidly developing SSL technology that has drastically changed business models of old. This week we see the third successive profits warning from currently the world’s largest lighting company, Philips, which can only be bad news for a strong European lighting industry.

Over the last year I have been working to provide support and evidence to the Photonics Unit of the European Commission located in Brussels which outlines why we still have an active European lighting industry that is not only worth acknowledging but actually worth actively supporting over the next decade. Of course we know Japanese, Chinese, Taiwanese and Korean governments are heavily investing in their lighting supply chain to make themselves number one in the new SSL dominated lighting world, but that shouldn’t mean Europe throwing in the towel and letting others dominate the market. In fact its true that China is the second largest GDP country and set to be the world’s largest economy (barring civil disruption or mass economic meltdown) by 2050 but that also means their consumers will want to buy high quality, stylish lighting designs that offer an experience well beyond basic LED offerings in the future.

I firmly believed that Europe is still number one in terms of lighting and can retain this position in the next hundred years by not only innovating but exploiting the innovation. The latter point is a skill we seemed to have lost at a European level for over a generation as we seem not to be able to exploit our innovation like cousins in the US or friends in China, Japan and Korean. The great news is that lighting designers from the UK are high sought after and regarded and this is where the change can happen. It is the leaders of the lighting design community that can show the way forward for the lighting supply chain by designing innovative lighting schemes that push the boundaries of current thought processes often staid by conventional thought.

Thankfully, the European Commission agrees and have recently published a Green Paper entitled ‘Lighting the Future: Accelerating the deployment of innovative lighting technologies’. The green paper is aimed at a wide audience covering individual consumers and professional users, the lighting industry, the building and construction sector, architects, lighting designers, electrical installers, municipalities, public authorities, civil society communities, professional associations and all other relevant stakeholders involved or interested in the topic and it can be downloaded from the EC’s consultation website at http://ec.europa.eu/information_society/digital-agenda/actions/ssl-consultation/index_en.htm.

At the same time as the launch of the Green Paper the EC has started a period of industry-wide consultation from the 15th December 2011 until 29th February 2012. The objective of the consultation is to seek the views of all interested individuals and organisations on the relevant issues involved by collecting replies on specific questions set out within the Green Paper.

To this end, the Green Paper proposes to launch a number of new policy initiatives and a public debate in Europe for accelerating the wide deployment of innovative high-quality lighting solutions, which are based LED and organic LED technologies also commonly referred to as ‘Solid State Lighting’ (SSL). The Green Paper addresses both the demand and supply side.

The Green Paper first addresses policies targeting European users (professional users and consumers) for overcoming existing challenges for wider market uptake. It then proposes policies addressing the European lighting industry with the aim to foster its leading position and competitiveness thus contributing to the creation of growth and jobs in Europe.

For example, on the demand side (European users) the EC proposes to raise awareness and demonstrate to consumers, professional users and public procurers that SSL technology is of high quality and saves energy and money over its long lifetime, helping Europe meet its energy efficiency targets, and propose new initiatives to prevent early market failure. Whilst on the supply side (European lighting industry) the EC proposes, amongst other initiatives, a raft of policies that foster the competitiveness and global leadership of the lighting industry and contribute to the creation of growth and jobs in Europe.

Current market penetration of SSL in Europe is very low: the LED market share (in value) reached 6.2% in 2010. However several studies such as ‘Lighting the way: Perspectives on the global lighting market’ by McKinsey & Company (2011) predict that SSL will account for more than 70% of Europe’s general lighting market by 2020. This affords a great opportunity to the European lighting industry with such a rapid growth rate in Europe over the next eight years and indeed I cannot think of any market that will have such strong demand in these timescales.

The Green Paper highlights that lighting accounts for 50% of the electricity consumption of European cities and increasingly, cities are developing sustainable urban lighting strategies integrated with urban development policies and implemented in close cooperation with lighting designers, architects and town planners. The potential of SSL to become the replacement technology for more than 90 million traditional street lights in Europe and its fast evolution are motivating many European cities to launch pilot actions to familiarise themselves with this technology, to experience its main benefits and to understand possible drawbacks.

There are some rather glaring barriers highlighted by the Green Paper which to many of us are obvious but to many are less so which include:
• Low-quality LED products
• High initial purchase cost
• Users are generally not fully aware of advantages and capabilities of SSL technologies
• Insufficient or poor product information
• Concerns for biological safety (the “blue light hazard”)
• Rapid technology obsolescence and missing standards
• Cities are not aware of, hesitate or do not have enough incentives to replace old outdoor lighting technologies by more energy efficient SSL
• The landlord-tenant conflict.

A key target of the Digital Agenda for Europe flagship initiative, under the Europe 2020 Strategy, to which the EU has committed itself, is to reduce electricity consumption for general lighting by 20 per cent by 2020 – currently estimated to account for 14 per cent of total power consumption in the EU.

The public consultation in particular seeks feedback on how to increase consumer awareness and ensure good quality and safe products that meet consumer expectations; how to reinforce cooperation amongst different players within the lighting sector and cooperation of the lighting sector with architects, lighting designers, electrical installers and the construction and buildings sectors.

The lighting community is therefore invited to participate in the consultation and provide feedback on the following questions raised in the Green Paper.

1. How would you propose to overcome the challenges outlined above for the wider market penetration of SSL technologies in Europe?
2. Which additional challenges do you see for a wider SSL market penetration in Europe and which solutions would you propose to resolve them?
3. What can Member States do to reinforce market surveillance of product performance and safety in the area of SSL lighting products?
4. What could the lighting industry do to ensure the performance of SSL products?
5. What can be done to raise awareness of consumers and professional users to SSL technologies and which specific measures and incentives would you propose for accelerating SSL uptake?

The Green Paper highlights in particular, the following key issues related to the evolution and competitive development of the European SSL industry that need to be addressed:
• The “valley of death”
• Strengthening the SSL value chain
• Fostering the cooperation between the SSL industry and the other involved players along the extended value chain
• The future of SSL manufacturing in Europe
• Securing the supply of scarce raw materials and recycling of end-of-life SSL products
• Standardisation
• IPR and innovation
• Access to low cost routes of investment
• Learning and Training

I certainly believe IPR is a key aspect for the lighting industry to be discussed at a European Level as we see today the large global companies fighting it out in courtrooms worldwide over a raft of patents in areas such as software, mobile telephony and portable devices already so its only an amount of time before we see large corporate battles in our sector. We have seen this at the LED emitter level early in the evolution of LED lighting but it’s bound to start at the fixture and systems level at some point. Patent battles and indeed patents themselves are pretty exclusive to large businesses where the cost of creating patents isnt prohibitive but history teaches us that innovation doesnt present itself at such companies but more from the smaller companies in the supply chain. However, if large companies use the IP might against the SME community then true lighting innovation will become extinct in Europe and we will see the industry lose its status as world leaders. On an LED technology mission to Japan in 2005 which I led, I found the Japanese Government had an excellent approach to IPR in what was becoming a real internal issue. The various LED companies were stating to go to court over LED related patents and the Government knew that if they couldn’t focus the industry on the exploitation of the technology Japan would be quickly overtaken and so they formed a Japanese wide agreement with industry that they wouldn’t litigate each other and I believe this is an approach Europe should adopt especially when you see the patent portfolio’s of OSRAM, Philips and others. Imagine what a competitive force that would be for Europe if the IP was shared with innovative start-ups and small and medium sized companies!

A second issue that affects the supply chain in Europe is the access to low cost investment capital to help growth of the SSL supply chain as the market adoption grows over the next eight years. In today’s economic woes we see banks dont even want to lend to other banks so what chance does an SSL company have when it states it wants to grow its business by 70% in the next eight years?!

Here is where some innovation needs to kick-in with a shared approach/vision between customer and supply chain in order to reduce commercial risks for both parties whilst gaining access to the latest CO2 reducing smart lighting technologies.

In relation to the LED lighting manufacturers reading this article then the EC proposed the following questions on how it can address the challenges facing the indutry:
1. What measures, beyond the ones above, could further support research and innovation and the reinforcement of the SSL value chain in Europe?
2. What other actions could be taken by industry to reinforce sustainable SSL manufacturing capacity in Europe?
3. What additional actions can reinforce cooperation along the value chain, in particular with architects and lighting designers, electrical installers and with the construction and building industry? What should be the role of the Member States and the EU in making it happen?
4. Are there gaps in standardisation today that hamper SSL innovation and deployment? If yes, where are such gaps and how can they be addressed?
5. What actions should Member States and industry take to support education, vocational and lifelong learning and training on SSL and to address the adaptation of educational curricula to include the latest lighting technologies?

For those interested in taking part in the consultation, the documents are available at: http://ec.europa.eu/information_society/digital-agenda/actions/ssl-consultation/index_en.htm and submissions should be made by 29 February 2012. Contributions do not need to cover all of the questions raised in the Green Paper.  They can be limited to questions of particular interest to you.

Finally, I would like to mention that over five years ago in this column I predicted 2012 would be the year that mass volume shipments begin of 60W LED equivalent light bulbs and I think by December that prediction may turn true.

What do you think will happen in the next five years if the European Commission gets its way and supports the European Lighting industry. Let me know...

If you have any questions about this or anything relating to SSL I will be at The Arc Show taking part in the IALD Enlighten Europe conference.
g.archenhold@mondiale.co.uk

Geoff Archenhold has been seconded twice to the UK Government to support the Lighting, LED and Photonics industry and currently helps LED companies develop business plans to raise investment from the finance community. He is an active investor in LED driver and fixture manufacturers and a lighting energy consultancy. The views expressed in this article are entirely those of Geoff Archenhold and not necessarily those of mondo*arc.

 

Pic courtesy of OSRAM
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