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A second factor was that lobbying efforts by Philips and others to persuade governments to enact phase-outs had been much more successful than expected. Consumers were now aware of the economic benefits of solid-state lighting; utility rebate programs had made LED light bulbs affordable. Though solid-state sources were still much more expensive, their energy efficiency meant that the return on investment for installers was in some cases less than a year. This failure to foresee how quickly people would grasp the financial advantage was not really Philips’s fault. Nobody had anticipated how effectively the lobbying would work. LEDs were improving faster than forecast. This should not have come as a surprise. The devices were, after all, semiconductors thus subject to the logic of the learning curve: the more of them you made, the better they got. In particular, LEDs kept getting brighter, soaring way beyond what Haitz's Law had predicted. Some devices were now so bright you could barely even look at them. Those dazzling white spots on the road ahead that caused drivers to squint at night? They turned out to be the solid-state headlights, not of automobiles, but bicycles. In addition to much brighter, mass production meant that LEDs were also getting much cheaper. The impetus for the growth spurt in their production had come from the (unanticipated) market for backlights, first of mobile phones, then of flat screen TVs. But in tooling up to meet this demand, chipmakers had grossly overestimated the size of the display market. When it reached saturation, the result was excess production capacity. This caused a glut. In the semiconductor industry boom-bust cycles are endemic. Almost overnight, LEDs had become a commodity; as a result of the brutal war that ensued, prices plummeted. Good news for consumers, but a disaster for companies striving to maintain their profit margins.
19 In May 2016 Philips offered 25 percent of its lighting business on the Amsterdam stock exchange; in February 2017 the company announced the sale of a further 15 percent. In March 2015, Philips announced that it was selling 80 percent of Lumileds, its chipmaking subsidiary, to GO Scale Capital, a Chinese technology fund. The sale was subsequently terminated after the US government raised concerns about national security, but Philips still had a particular reason for wanting to cut Lumileds loose. Fourfifths of its subsidiary’s sales were to outside customers. Philips was thus effectively helping other companies to enter the lighting market and compete against itself.
Over the decade since Philips had bought out Agilent’s share, Lumileds had been losing talented staff. “Seems like every time you turn around,” one industry observer commented, “someone else is gone.” The important decisions were all being taken in Amsterdam and Eindhoven. In Silicon Valley people muttered darkly that it was a case of, If you ain’t Dutch, you ain’t much.20 Philips seemed incapable of retaining the most creative employees from its acquisitions. In particular, brilliant individuals who were determined to revolutionize the industry, like Kevin Dowling and Brent York. They had led the engineering teams at two of the startups which pioneering solid-state lighting, Color Kinetics (Dowling) and TIR Systems (York), both of which were bought by Philips in 2007. Postacquisition, Dowling and York worked at Philips for a few years before quitting in frustration or as a result of belt-tightening. Even home-grown talent proved hard to hold onto. Gerhard Harbers, for example, a Dutchman who left Philips in 2007 to form Xicato, a leading Silicon-Valleybased LED startup.
20 And sometimes even if you were Dutch. By 2015 both Leon van de Pas and Rogier van der Heide had left Philips. “If you look at big organizations,” Harbers explained, “you have the hunters, who are bored with the existing stuff, who want to do new things. But then you have, let’s call them the farmers, the people on the operations side, who just want to take little steps, like make it a little bit more efficient, drive costs down. They want to change as little as they can because change is dangerous. And I think in companies like Philips, which have been very successful in lighting for over a hundred years, a lot of management gets promoted as a result of good business-as-usual and not as a result of the innovation they fostered.” Brent York agreed. “It was a culture where the safe answer is always no,” he told me. “No-one ever gets fired for saying no, and very few people are successful for saying yes.” In big bureaucratic firms, moving quickly went against the grain. With more than 50,000 employees, Philips Lighting was nothing if not big. Its paternalistic corporate culture was not open to innovation from the outside. Or indeed, for that matter, innovation from the inside. “There’s so many entrenched interests, and people are very territorial within these companies,” Kevin Dowling said.
Philips Lighting was divided into silos. The two biggest were Lamps (bulbs) and Luminaires (industry jargon for fixtures), each of them billion-dollar entities in its own right. They competed fiercely with each other. When Luminaires acquired Color Kinetics, Lamps responded by buying TIR Systems. One unhappy consequence of this internecine feuding was that, “when somebody in one group does something that’s very much like what the other group is doing, the other group gets very nervous about it,” Dowling said. “They don’t just not support it, they actively campaign against it. And that just kills newborn ideas, they’re drowned like a bag of kittens.”
Philips’s core competency had always been manufacturing. The highly specialized world of gas, glass, and brass had erected formidable barriers to entry. But making LED chips was by contrast a bit like baking cookies: once you got the recipe right, you could crank them out forever. Now, with chipmakers falling over themselves to sell you their latest LEDs for next to nothing, the barriers had come tumbling down. Aggressive upstarts swarmed in over the ramparts. Opple, for example, a Shanghaibased start-up that in less than a decade had ballooned from nothing to become China’s largest lighting company. Led by CEO Ma Xiuhui, a selfmade entrepreneur known in her home country as “the Queen of Lighting,” Opple’s strategy was to ruthlessly undercut established brands like Philips. The Chinese firm was now rapidly expanding overseas, adding insult to injury by hiring former Philips executives to lead the charge and establishing its European office in Eindhoven.21
Weighed down by the albatross of its legacy businesses, Philips was at a disadvantage in defending itself against nimble SSL-only specialists like Opple. The newcomers’ strategy was brutal. As they had done in other industries like solar panels, the Chinese were prepared to pour billions of dollars into building up their manufacturing capacity. Then, attempting to kill off rivals, they would slash their prices to the point of cost. When this reckless death spiral ended, they would own the market. The entire infrastructure of conventional lighting was being destroyed. “It’s destruction, because what’s left after that?” Brent York wondered. “Where do you go from here?” For LED light bulbs, market saturation loomed. Already bulb lifetimes had soared beyond 30,000 hours, or 27 years, and were still climbing. What that meant was, no more replacement business. Fewer and fewer sockets wee being targeted by more and more manufacturers. And this time round, there would be no cosy cartels to turn back the clock. Industry veteran Chris Brown coined a word to describe the impending end of business as usual in lighting: he called it “illumigeddon.”
21 The challenge was implicit in the company’s name: Opple derives from the Chinese “ou-pu” meaning “European standard.” Brown was CEO of Wiedenback-Brown, a Purchase, New York, based distributor of light bulbs and fixtures his great-grandfather had founded over a hundred years ago. (He liked to joke that his ancestor had been a friend of Thomas Edison.) Brown’s epiphany that the boring old lighting business was about to change forever had come in 2008 when the procurement manager at one of his biggest light bulb customers, a national retail chain, called to ask him some questions about the LED lights a company that Brown had previously been unaware of had been demonstrating. “And not only did I not know the answers, I’d never heard the questions before.” Now, with huge tech-savvy companies like Cisco and Amazon sniffing opportunity in the rapidly reconfiguring world of lighting, Brown warned his fellow distributors “some of you guys are out of business, you just
don’t know it yet.”
But even as the old timers began to slink from the field of battle licking their wounds, there were still plenty of reasons to be optimistic about the future. After all destruction, as the economist Joseph Schumpeter famously asserted, could also be creative. Lighting was fragmenting. “It’s being blown apart to be reassembled, kind of like your kid’s Lego,” York said. “You have to take it apart before you can reassemble it into the other thing. What that other thing looks like yet we don’t know, but we’ve got a few clues, some ideas, a lot of speculation.” Few people had done more speculating on the future of lighting than Roland Haitz. He had been, first, the prophet of the solid-state lighting revolution then, later, its catalyst. In June 2015, having lived to see his vision largely fulfilled, Haitz died. Just before his death, he drew a final, telling comparison: “Solid-state lighting is where the Internet was in the 1980s. Just as we could not then have predicted what the Internet is now, 30 years later, so we cannot foresee all that light and lighting will become in the next decades.”
The first part of this book has looked mainly at light bulbs and energy efficiency. But though bulbs are its most familiar manifestation, lighting comes in many different guises. In the next part we shall look at some of these other types of lighting and the companies that make it, and how for them too, the advent of LEDs has changed everything.
P A R T II: Future Fixtures
C H A P T E R E I GH T
Bright Lights, Big City
A passionate nature, a forward-looking attitude, an astute business mind — these are not attributes possessed by your garden-variety municipal functionary. But then Ed Ebrahimian, director of the City of Los Angeles’s Bureau of Street Lighting, was far from being a typical bureaucrat. Two revolutions, almost thirty years apart, had shaped Ebrahimian’s destiny. The first was Ayatollah Khomeini’s Islamic Revolution of 1979. Though Iranian-born Ebrahimian was an Armenian Orthodox Christian. In 1977, aged seventeen, he had left Iran to study at California State University Northridge in the San Fernando Valley. Then the revolution kicked off back home and everything changed. Ebrahimian’s entire family ended up emigrating to the US. He himself had never returned to his native land. Following his graduation in 1986 Ebrahimian applied to various Los Angeles city departments for a job as an entry-level civil engineer. The Bureau of Street Lighting was first to call back. He accepted their offer. Subsequently a couple of other departments also tried to hire him, but having already given his word to the Bureau, he turned them down. Once committed, Ebrahimian dedicated himself wholeheartedly to his unexpected vocation. “Street lighting has been in my blood from the very first day,” he told me. Though his original plan had been to work for the city for five years, gain some experience then move into the private sector, Ebrahimian stayed on, working his way up the Bureau’s career ladder. He became its director in 2005, taking over what was the second-largest municipally-owned street lighting system in the US.
The second revolution was LEDs. For the first two decades of his professional life, the lighting industry had been, as Ebrahimian liked to say, “stagnant.” That is, “really nothing was happening, because there were no new technologies.” But just after taking over as director Ebrahimian was forced to confront a crisis caused by the unhappy fact that while the Bureau’s costs were rising, its budget was not. Since 1996, California’s Proposition 218 had made it impossible for local governments to raise taxes without voter approval. As a result the city’s street light maintenance fund had remained frozen for fifteen years. Ebrahimian went to see the mayor of Los Angeles, Antonia Villaraigosa, to implore him for an increase in their annual assessment. The mayor’s response was that politically, the time was not right to send out a ballot to property owners. “He basically told me, Ed — you go find a way. And I said, OK, Mr Mayor — that’s my job, I’m gonna do that.”
If the Bureau was not to go broke, something would have to be done to curtail its expenses. Ebrahimian went through the big-ticket items in his budget, line by line. First came the salaries of the Bureau’s 250 employees and the eighty-odd bucket and maintenance trucks his repair crews drove. Cutting back on those items would jeopardize the Bureau’s ability to keep the street lights working, negatively impacting the quality of life for Angelenos. That was unacceptable. Next, he turned his attention to energy costs. For electricity the Bureau was paying the local utility around $16 million a year, almost forty percent of its total expenses. Ebraminian saw that a more energy-efficient solution, if there was one, would fix their problem. He immediately re-assigned three of his engineers whose job was to evaluate fixtures, telling them get onto the Internet and look for promising new technologies. Within a couple of weeks, the team reported that they had identified a solution with the potential to cut energy costs in half — LEDs. “And I said, OK — we need to follow this technology.” From having been dull as ditchwater, street lighting was about to become very interesting indeed.
If you were to compile a list of technologies that richly deserved to be replaced, high-pressure sodium-vapor street lights would surely come close to the top. Invented by GE in 1962, sodium-vapor lamps became popular with municipalities following the oil crises of the 1970s because they consumed half as much energy and lasted far longer than the mercury-vapor lamps they replaced. Soon sodium lamps accounted for almost half of America’s 37 million-odd street lights; in other countries, the percentage was even higher. But though sodium-vapor was cheap, it was also nasty. It bathed streets in a harsh yellow blaze, producing an effect that that one writer memorably described as “jaundiced weirdness.” Worse, instead of shielding the light and focussing it downwards, the typical “cobra-head” - so-called because, viewed from beneath, the fixtures resembled a snake’s hooded neck - street lamp wastes much of its output. Amber glare spills from the fixture into upperfloor bedroom windows, a phenomenon known as “light trespass,” making it hard for some residents to sleep without a blackout. In addition, a luminous orange fog suffuses the urban sky, blotting out the stars and frustrating astronomers.
As if that were not bad enough, rendering of colors under sodium lights was woeful. It might be spring, but after dark the leaves on the trees always looked brown. This was more than merely an esthetic issue, safety and security were also concerns. Sidewalk curbs were often painted yellow as a visual clue, to prevent the elderly and visually-impaired from tripping. But under sodium lights it was impossible to make out the distinction. It was also hard for police and security personnel to identify nocturnal predators such as car thieves, burglars, and vandals on CCTV. True, an alternative type of outdoor lighting did exist. But metal-halide lamps were more complex, making them costly and precluding their use for many applications. Metal-halide was also occasionally prone to what the technical literature delicately described as “sudden non-passive failure.” That is, an explosion which shattered the bulb, spewing hot glass on anyone unlucky enough to be passing below.
In July 2005 Ede, a small city in the central Netherlands, became the world’s first municipality to replace some of its street lights with LED fixtures. They were made by Philips at its plant near Lyon in France. The lights were a clear portent for some, like Roger Sexton, then a Philips executive (who would later jump ship to join Xicato, a solid-state lighting startup). “You can light a road with LEDs? And economically it’s the same as using high-pressure sodium? That was a seminal moment for me,” Sexton told me. These initial LED street lights were still quite dim, suitable only for illuminating pedestrian walkways. But Philips predicted (correctly) that, as the chips improved, by 2008 LED street lights would be bright enough for residential areas and major roads. Having initiated this new market, however, Philips seems to have taken its eye off the ball. In 2005, when Ed Ebrahimian began his search for LED street lights, he found the big lighting manufacturers singularly lacking in enthusiasm. “The reason,” he explained, “is that for many years, they had a system in place; they were used to providing replacement parts for the f
ixtures they had sold.” To be sure, plenty of companies were making LEDs, but precious few were making LED fixtures for street lights. In fact, when it came down to it, there was really only one, a small specialist outfit called Ruud Lighting based in Racine, Wisconsin, on the shores of Lake Michigan.
Al Ruud - he pronounced his name to rhyme with wood - was not known, he once remarked, with some irony, as “the world’s most patient person.” In fact, throughout his long career in the illumination business, Ruud had been repeatedly exasperated by its slow pace of change. “The core technology has been the same in the lighting industry,” he told the editor of Edison Report. “Some people are pretty comfortable with that — I am not.” Ruud’s father was an electrician. Starting in junior high and continuing all through college, he worked for his old man. “So I knew what it was like to bend pipe and pull wire.” Ruud also learned that the markups added by the byzantine sales channel that separated manufacturer from end user were the second biggest item in the cost of a lighting fixture. In 1982 he founded Ruud Lighting based on the novel idea of cutting out the middle men and selling directly to electrical contractors. This meant he could ship product faster than his rivals. The company was profitable from its first year in business. Its mantra was continuous innovation. “Innovation is the key,” Ruud told me, “and part of that is not playing on someone else’s platform, trying to move it so that people have to catch you. I don’t like doing things the way other people do, because I don’t know how you make money doing that. You’ve got to find different ways, innovative ways, be it a marketing channel or the product technology”