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Philips Just Secured a Top Spot in This $94 Billion Market

IMS research reports that incandescent bulbs currently represent half of the world’s lighting.

The problem is, they’re a huge drain on our energy resources. And as a result, lighting consumes 25% of the world’s electricity.

That’s why “America, Japan and the EU are close to phasing them out [and] other countries are set to do so, too,” according to The Economist.

But what technology will replace them?

Well, it looks like light-emitting diodes (LEDs) are the most likely heir to the lighting throne. And thanks to a cost-cutting breakthrough, Philips (NYSE: PHG) is poised to wear the crown.

Let me explain…

Prepare for the LED Invasion

LEDs have already found their way into smartphones, TVs, computer monitors and digital cameras.

But they’re also a good substitute for the incandescent bulbs around your house.

You see, not only do LEDs consume 80% less energy than incandescent bulbs, but they also last up to 50 times longer.

Because of these benefits, McKinsey estimates that LEDs could dominate 59% of the total lighting market by 2020. That’s compared to just 10% last year.

Before we start replacing all of our bulbs with LEDs, though, there’s one major problem: cost.

LED bulbs go for around $40 each right now. And since the average American home has 42 light sockets to fill, that adds up to over $1,680… Not exactly what most people are willing to spend on lighting. Especially when incandescent bulbs go for around $0.50 each.

Of course, there are always compact fluorescent lamps (CFLs). They’re more efficient than incandescent bulbs and cost around $4 each.

But let’s be honest, no one’s really a huge fan of the harsh light CFLs give off. Personally, they make me think of hospital waiting rooms. A short lifespan and toxic mercury inside don’t help the case for CFLs either.

What the world really needs is an LED bulb that’s affordable to the masses. And that’s where Philips comes in.

Because the company’s found a way to drop the price tag on LEDs significantly…

Saving  35 Terawatt Hours of Electricity Each Year

Philips developed an LED bulb that consumes less than 10 watts for the same amount of light output as a 60-watt incandescent bulb. In other words, it cuts energy consumption by 83%.

Last month, the company won $10 million from the L Prize competition through the Department of Energy (DOE). The contest is set up to inspire innovators to create “high-quality, high-efficiency, solid-state lighting products to replace the common light bulb.”

The new bulb should hit store shelves next year, and costs $18.

According to the DOE, if everyone switched their 60-watt bulbs over to Philips’ new LED, the United States would save enough power each year to light around 18 million homes.

Of course, the transition isn’t happening overnight. After all, $18 a bulb is still pretty steep for the average consumer.

But LED costs should be on par with CFLs in four years. And the Department of Energy expects advances in production technology to slash costs by 90% in 10 years.

Bottom line: The market for LEDs is estimated to explode to $94 billion over the next nine years. And the players with the most efficient – and cost saving – solution should easily dominate the competition.

Good investing,

Justin Fritz

Justin Fritz

, Executive Editor

View More By Justin Fritz