EDS: Strategy for distributor success with HB LEDs

Ah, lighting, this year’s EDS shinning star. The market holds great opportunity for the electronics supply chain. It’s particularly attractive to distributors, as coming HB LEDs (high brightness light-emitting diodes) will require full system approaches from suppliers and manufacturers, including thermal management systems to control heat.

HB LEDs, named a 2007 hot technology by EDN, are expected to be more reliable, provided better device performance, and be more energy efficient than the most efficient fluorescent lights in the near future. While HB LEDs aren’t there yet, especially for consumer use, some estimate high-growth opportunities for driver ICs from 2007 to 2011 will be driven by general illumination, signs and displays, and automotive applications. Those opportunities are forecasted to record a combined compound annual growth rate of 38% with the total market for HB LED driver ICs expected to grow to more than $1.9 billion in 2011, according to Strategies Unlimited. 

Are suppliers ready to take advantage of that? Absolutely not. And that’s ok because in this still relatively new market now is the time to make investments and begin laying out business strategies for future growth.

Cary Eskow, director of Avnet LightSpeed, at a Tuesday panel presentation here in Las Vegas shed some light on what distributors need to do to triumph in the HB LED marketplace. He noted three necessities for success, the first of which is specialized knowledge. “That’s the distributor’s ability to understand these new types of customers and to speak in their language. This is the language of light. It’s not in diodes, it’s not in capacitors or microcontrollers — it’s a different world.”

Eskow said that distributors need to understand the market fully, comprehending its pressures and the legislation affecting it, and then be able to tie all of that together, which lead him to his second strategy for success, recognition that HB LEDs are not single components, but full systems.

“It’s the understanding that an LED is not a component. It requires thermal heat management and interconnect, knowledge of phosphors, microcontrollers. There’s a lot pull through associated with that. Typically, I would say for every dollar in high-brightness LED, there are two to five dollars in pull through,” he said exampling associated analog and microcontroller parts.

Eskow’s third ingredient for success is patience. He noted that a lot of industry analysts, like Strategies Unlimited, are predicting tremendous growth, but said that such growth is going to be incremental.

“That will happen, but … the next year or two are going to be slow as things engage,” Eskow said.

“Now is the time to make investments, now is the time to become familiar with the tools and solutions and to understand the system,” he concluded.

Share your thoughts on HB LED technology and the distributor opportunity below. And stay tuned to this blog for more from EDS.