Strategically Blogging

China Pricing War II

Martin Shih 11/17/2014

We recently took a trip to China to interview top manufacturers of LED components for our upcoming China Quarterly Updates Report. According to these major LED players, we are convinced that several LED trends we predicted in my blog at the beginning of this year did and are continuing to happen.

The Dental Laser Market Needs A Filling

Allen Nogee 10/31/2014

It was just 14 years ago when a group of dental professionals came together to form the World Clinical Laser Institute. This group was formed to promote and share their ideas and experiences and to advance dental care through the use of lasers. Today, the WCLI is the largest group of dental professionals supporting the use of lasers in dentistry; with 19,000 members, the use of lasers by the dental profession has not grown as fast as many had expected. Today, in the US, roughly 7% of all dentists use lasers, which means that 93% of dentists don’t. Of the four medical laser segments we track (cosmetic, ophthalmic, surgical, and dental), the dental area is growing the slowest.

Integrated vs. Non-Integrated Luminaires

Shonika Vijay 10/30/2014

As time goes on, it is becoming more and more apparent that LED lighting will soon take over. With the current ban of 40W through 100W incandescent light bulbs and the dropping prices of LED lighting, it is no surprise that LED lighting is the lighting of the present and will be lighting of the future. However, LED lighting was first, or in some cases still is, introduced into the market to replicate the incumbent technology so that consumers don’t get scared away by a lighting system that they can’t associate with their old one. What I mean here is that having a fixture where the consumer can physically take out the lamp and replace it if it burns out. Today, there seems to be plenty of interest in fixtures/luminaires where the lamp could be replaced.

When Will OLEDs be the Next Big Thing in Lighting?

Stephanie Pruitt 10/08/2014

OLEDs have been gaining in popularity lately, mainly in displays, but also more recently in general lighting. They offer many benefits over traditional and LED lighting, including being a surface emitting light source (as opposed to point emitting), being extremely thin, and having the capability to be flexible and even transparent. OLEDs open the doors to really innovative and creative light forms that were previously not possible with traditional lighting. However, they still have a ways to go in efficacy, lumen output, and price compared to their less expensive inorganic counterparts that are still struggling to really penetrate into the market.

Shonika Vijay

High-End Lighting Markets for Solid State Lighting

Shonika Vijay 09/30/2014

Lighting has always been seen as a commodity market. In fact, most people buy their light bulbs from the same place they buy their milk. It is a price war out there with slim profit margins on lighting products; meanwhile, the market keeps demanding higher quality. The general indoor lighting market mostly consists of the following form factors: downlights, troffers, suspended pendants, track lights, and high bay lights (a detailed market report of general lighting luminaires with these form factors along with all technologies will be released this November). Downlights and troffers make up the majority of the installed luminaire base for all regions. In order to compete for penetration in these installed luminaire bases, LED lighting has had to slash its prices while making sure it can sustain the light output levels of halogens, incandescent, and fluorescent technologies.

The solar market and the 2nd-Derivative Paradox

By Tom Hausken
How could equipment sales in an exponentially-growing market be anything but upward? It happens all the time. Welcome to the 2nd-Derivative Paradox. That's my name for the trap that one can fall into when it comes to capital equipment markets. Solar is a great example. It's hard to explain the paradox, though, so bear with me.

Start with installed capacity. If you are a power generator, you think in terms of the cumulative installed generating capacity in the world. This is what the users actually use. The figure shows three scenarios how that might play out, and they all look pretty much the same in this chart. Nice, steep slopes. Note how they all start at the same point and end up at the same point.



Then look at panel shipments. But the solar panel industry isn't interested in what's already out there. It needs to ship new panels every year. The shipments amount to a 1st derivative: the new capacity that's added to the infrastructure every year. Now the differences in the scenarios show through, as shown in the second figure. But the scenarios all show steep upward growth. What's to worry about?


Now look at panel manufacturing equipment. The solar manufacturing equipment industry, and that includes lasers--isn't even interested in solar shipments, but the need for more manufacturing capacity to make the panels. You only need more equipment when you are shipping more panels than before. That amounts to a 2nd derivative of the cumulative generating capacity, and can give wildly different results. New equipment is shipped in all three scenarios, but in the "sustaining" scenario the equipment shipments are flat year after year, while in the "slowing" scenario they start out strong, but then decline. Ouch.

Other traps. Of course we would all like to live in the "growing" scenario. The trouble is, strong positive exponential growth doesn't last indefinitely, no matter what they say. And that's not even considering some ups and downs along the way, like this year. A slight shift in the solar panel shipments wreaks total havoc for equipment shipments.



Other things that juice equipment sales. The same trap exists in other industries, too. But there are other details to consider. First, there is usually some churn in suppliers. Machines also get obsolete. And there is also the early obsolescence forced by things like Moore's Law. These all have to be considered.

Watch that 2nd derivative. Don't get me wrong. I love solar. I had a summer job at TI testing solar cells back in the Jimmy Carter era. We all believe it's going to be a great thing in coming decades. But it's not enough that the cumulative generating capacity will be on a steep upward slope for years to come, because when it comes to manufacturing equipment, it's the 2nd derivative that counts.

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