Supplying LEDs as Consumer Electronics: Creating a $54 Billion Market with Enterprise Software

By: Joseph A. Hazani

Confidential Information of Joseph Hazani
(joseph@ledperformanceconsultant.com)

 Enables fast computation
 Cheap to manufacture
 Revolutionizes electronics and
humanity
 The physical manipulation of electricity
for human applications (e.g. microwave
timer; cancer imaging; angry birds)


 An IC that emits light
 Faces similar market environment
as personal computing


http://img.ledsmagazine.com/pdf/Lightingthe
Way.pdf

Computing:Optical

Fast technological development of
components
 CPU:LED
 Memory:Lens
 Motherboard:PCB
 Driver:Driver


High tech spawned by integrated circuit.
But not all have rapid component development


In computers, what
causes market
demand for rapid
product component
development?
Answer: Performance


Windows 3.0 Windows 95

Windows XP Windows Vista


 Software = human application of
computers
 Best software uses best computing
resources
 Initial Demand for software by
consumers leads to rapid
computing
innovation/development for better
computing resources


 “Architectural. This application is
used for the illumination of
building structures, with the artistic
integration of light source and
architectural elements.
Architectural lighting can be both
functional and decorative. In
addition, architectural lighting can
be applied both outdoors and
indoors.”

 “Hospitality. This lighting
application includes general
lighting for hotels, bars and
restaurants. The hospitality
application is often focused on
decorative lighting and spans an
entire spectrum from mood
lighting to orientational lighting.”

http://img.ledsmagazine.com/pdf/Lightingthe
Way.pdf

 Enables greater creativity and
more project competitiveness


http://www.projectfrog.com/

 Explains the parallel component
specializations between LEDs and
computing


 Easy for lights to meet Energy
Requirements of Projects.
 Minimal savings rate between competing
products.
 Hard for lights to meet Design
Requirements.
(color temperature, CRI,
angular output,
transmission efficiency,
etc.)


DELL Innovation: build business
around best parts; efficiency =
productivity = profit

Virtual Integration


“As a small start-up, Dell couldn’t
afford to create every piece of the
value chain. But more to the point,
why should we want to? We
concluded we’d be better off
leveraging the investments others
have made and focusing on
delivering solutions and systems to
customers.” – Michael Dell


http://hbr.org/1998/03/the-power-of-virtual-integration-an-interview-with-dell-computers-
michael-dell/ar/1

“In the computer industry, inventory
can actually be a pretty massive risk
because if the cost of materials goes
down 50% a year and you have two
or three months of inventory versus
11 days, you’ve got a big cost
disadvantage. And you’re
vulnerable to product transitions,
when you can get stuck with
obsolete inventory.” – Michael Dell


Build-to-order model (“direct
business model”) eliminates virtually
all inventory
 Savings on supply purchases
 Reduces risk from obsolescence


SKUs Volume/SKU Cost (total) Inventory (% Inventory ($)
(total) volume)
1 1,000,000 $10 100,000 (10%) $1,000,000
(1,000,000) ($10,000,000)
1,000 5,000 (500,000) $10 10,000 (2%) $100,000
($5,000,000)

Half the production volume, but efficiency yields $900,000 in savings


4Q11 4Q11 Market 4Q10 4Q10 Market 4Q11-4Q10
Company Shipments Share (%) Shipments Share (%) Growth (%)
HP 14,712,266 16.0 17,554,181 18.8 -16.2
Lenovo 12,931,136 14.0 10,516,772 11.3 23.0
Dell 11,633,880 12.6 10,796,317 11.6 7.8
Acer Group 9,823,214 10.7 12,043,606 12.9 -18.4
Asus 6,243,118 6.8 5,180,913 5.5 20.5
Others 36,827,666 40.0 37,358,786 40.0 -1.4
Total 92,171,280 100.0 93,450,575 100.0 -1.4

Preliminary Worldwide PC Vendor Unit Shipment Estimates for 4Q11 (Units)

http://www.gartner.com/it/page.jsp?id=18935 (joseph@ledperformanceconsultant.com)
23

Value in creating consumer
electronic supply chain for
Lighting Industry


Dell’s SCM facilitated consumer demand for greater
computer performance through increasing the
obsolescence rate


4 4
1 1
Lighting Lighting
OEM OEM
3 3
2 2
Light
Diffusers Dist/Rep Plastics Dist/Rep

two parallel supply chains for a product combined
increases distribution channels for each input

7

8 2 supply inputs
9 ~10 (2.5x) distribution outputs
Lighting
OEM 6

4 5
Diffusers Lighting
Dist/Rep
OEM
10
Reverse distribution

2
1 3
Plastics

 Increased supply management
means faster product
development (greater “velocity”)
 Faster product development
means faster consumer feedback
mechanism: faster obsolescence
rate


Market Momentum is Exponential
600

500 y = 2.0697e0.7771x
439 R² = 0.9979
400
Distribution Outputs
300
216 Expon. (Distribution
200 Outputs)
100 105
50
0 4 10 23
1 2 3 4 5 6 7


 To remain competitive, market will
reward greater momentum: scaling
with more inputs & outputs


 Conflicting supply-chains cause
friction (decreasing momentum)
 Therefore, component competition
will be based on best consolidation
efforts


 LED Energy Savings is a Red Herring
 LEDs are Performance-based
electronics (“Consumer
Electronics”)
 Value in increasing market
momentum for consumer
electronics (see: Dell)
 Value in enterprise software
solutions that increases market
momentum


 Opportunity for Enterprise
Software (assessed at 5% of annual
market costs):
1. Now: $25 Million
2. 2016: $250 Million
3. 2020: $400 Million


Supplying LEDs as Consumer Electronics: Creating a $54 Billion Market with Enterprise Software

Recommended

Recommended

More Related Content

Similar to Supplying LEDs as Consumer Electronics: Creating a $54 Billion Market with Enterprise Software

Similar to Supplying LEDs as Consumer Electronics: Creating a $54 Billion Market with Enterprise Software (20)

Recently uploaded

Recently uploaded (20)

Supplying LEDs as Consumer Electronics: Creating a $54 Billion Market with Enterprise Software