NanoMarkets Report

LED Phosphors Markets 2012

Nano-541

Published May 2012

Entire contents copyright NanoMarkets, LC. The information contained in this report is based on the best information available to us, but accuracy and completeness cannot be guaranteed. NanoMarkets, LC and its author(s) shall not stand liable for possible errors of fact or judgment. The information in this report is for the exclusive use of representative purchasing companies and may be used only by personnel at the purchasing site per sales agreement terms. Reproduction in whole or in any part is prohibited, except with the express written permission of NanoMarkets, LC.

Table of Contents
Executive Summary .....................................................................................................1 E.1 Key Opportunities for LED Phosphors .................................................................1 Page | i
E.1.1 General Illumination Indoor and Outdoor .................................................................................. 2 E.1.2 Streetlights and Automotive Lighting ............................................................................................ 2 E.1.3 Display Backlighting ....................................................................................................................... 3

E.2 Firms to Watch in LED Phosphors and Related Industries ....................................4 E.3 Thoughts on China as a Supplier and User of LED Phosphors ...............................6 E.4 Summary of Eight-Year Forecasts for LED Phosphors ...........................................6 Chapter One: Introduction ......................................................................................... 10 1.1 Background to This Report: A Time of New Opportunities for LED Phosphor Makers .................................................................................................................. 10
1.1.1 Phosphors Enable the LED Industry ............................................................................................. 10 1.1.2 LED Phosphors: Not Just a Volume Play ..................................................................................... 11 1.1.3 LED Phosphors: Material Trends ................................................................................................. 11 1.1.4 Phosphor Technology: Still Improving ......................................................................................... 13

1.2 Objectives and Scope of This Report ................................................................. 13 1.3 Methodology of This Report ............................................................................. 14 1.4 Plan of This Report ........................................................................................... 14 Chapter Two: Inorganic Phosphors: Materials, Technologies and Products ................ 15 2.1 Standard Conversion: Blue LEDs with YAG:Ce Coatings and Beyond .................. 15
2.1.1 Beyond Yellow ............................................................................................................................. 17

2.2 UV and NUV-LED Strategies .............................................................................. 18 2.3 CCT and the Closing of the Warm White Technology Gap .................................. 19 2.4 Phosphor-on-LED vs. Remote Phosphor Coatings .............................................. 19 2.5 Emerging Phosphor Strategies .......................................................................... 21
2.5.1 Hybrid Phosphors ........................................................................................................................ 21 2.5.2 Glass Phosphors ........................................................................................................................... 21 2.5.3 Nanophosphors ........................................................................................................................... 22

2.6 Alternatives to Better Phosphors ...................................................................... 22

2.6.1 RGB LED Combinations ................................................................................................................ 22 2.6.2 QD-Coated LEDs ........................................................................................................................... 23

2.7 Summary of Alternative Technologies for Achieving White LEDs ....................... 24 2.8 Key Points Made in This Chapter ...................................................................... 24 Chapter Three: LED Phosphors Value Chains, Opportunities, and Challenges ........... 26 3.1 General and Architectural Lighting Markets ...................................................... 26
3.1.1 The Transition to LED lighting and its Impact on the Size of the Addressable Market ................ 26 3.1.2 Consumer Dissatisfaction with LED Lighting ................................................................................ 27 3.1.3 Regional Difference in Lighting Tastes and What They Mean for the LED Phosphors Market .... 27 3.1.4 So, Which Phosphors will Succeed?............................................................................................. 29 Page | ii

3.2 Outdoor Lighting Applications and LED Street Lighting ...................................... 31

3.2.1 Current and Future CRI and CCT Requirements for Streetlights ................................................. 31 3.2.2 Other Outdoor Lighting ............................................................................................................... 32

3.3 LED Backlights .................................................................................................. 33

3.3.1 Competitionand Opportunitiesfor LED Phosphors in Display Backlighting .......................... 33 3.3.2 Edge-lit LCDs vs. Direct-LED Technologies and their Influence on the Phosphors Market .......... 35

3.4 Major Challenges to the LED Phosphor Market ................................................. 36

3.4.1 The Rare Earth Supply Problem: Consequences and Opportunities ........................................... 36 3.4.2 Manufacturing Challenges for Phosphors ................................................................................... 37 3.4.3 Potential Health and Safety Issues With Phosphors .................................................................... 38

3.5 Key Points Made in This Chapter ...................................................................... 39 Chapter Four: LED Phosphors Markets and Forecasts ................................................. 41 4.1 Forecasting Methodology ................................................................................. 41
4.1.1 Scope of the Forecast .................................................................................................................. 42 4.1.2 Pricing Assumptions..................................................................................................................... 42

4.2 Eight-Year Forecasts of LED Phosphors by Application ...................................... 43

4.2.1 LED-Backlighting in Displays ........................................................................................................ 43 4.2.2 Indoor General Illumination Markets .......................................................................................... 46 4.2.3 Outdoor General Illumination Markets ....................................................................................... 49

4.3 Eight-Year Forecasts of LED Phosphors by Phosphor Type and by Deposition Technology ............................................................................................................ 53
4.3.1 LED Backlighting in Displays ......................................................................................................... 53 4.3.2 Indoor General Illumination Applications .................................................................................... 57 4.3.3 Outdoor General Illumination Applications ................................................................................. 60

4.4 Summaries of Eight-Year Forecast for LED Phosphors ........................................ 64

4.4.1 Summary of Forecasts by Application ......................................................................................... 64 4.4.2 Summary of Forecasts by Phosphor Type and Deposition Technology ....................................... 66

4.5 Alternative Scenarios ....................................................................................... 69 Acronyms and Abbreviations Used In this Report ................................................... 71 About the Author ................................................................................................... 72
Page | iii

List of Exhibits
Exhibit E-1: Selected Key Firms to Watch in the LED Phosphors Market ...................................... 4 Exhibit E-2: Summary of LED Phosphor Market Values by Application 2012-2019 ........................ 7 Exhibit E-3: Summary of LED Phosphors Market by Phosphor Type 2012-2019 ........................... 8 Exhibit 2-1: Overview of Selected LED Phosphor Suppliers ....................................................... 16 Exhibit 2-2: Examples of Selected T6ypical Phosphors Used In Combination with Blue-LEDs ...... 18 Exhibit 2-3: Advantages, Challenges, and Status of Development for Selected Phosphor Alternatives .................................................................................................................. 24 Exhibit 3-1: Regional Color Temperature Preferences for "White" Lights ................................... 28 Exhibit 3-2: Challenges to Phosphor-Coated LED Backlighting in the Display Industry ............... 34 Exhibit 3-3: Overview of phosphor production ......................................................................... 37 Exhibit 4-1 Average Phosphor Prices by Phosphor Type 2012-2019 .......................................... 43 Exhibit 4-2: Analysis of the Penetration Rates for LED Backlighting in Display Applications 20122019 ............................................................................................................................ 44 Exhibit 4-3: Analysis of Total LEDs Used in Display Backlighting Applications 2012-2019 ........... 44 Exhibit 4-4: LED Phosphor Volumes and Market Value in Display Backlighting Applications 20122019 ............................................................................................................................ 45 Exhibit 4-5: Analysis of the Market for LED Phosphors in Indoor General Illumination Applications 2012-2019 .................................................................................................................... 47 Exhibit 4-6: Volumes and Market Values of LED Phosphors in Indoor General Illumination by Application 2012-2019 ................................................................................................... 48 Exhibit 4-7: Analysis of the Market for LED Phosphors in Outdoor Applications 2012-2019 ......... 50 Exhibit 4-8: Volumes and Market Values of LED Phosphors in Outdoor Applications 2012-2019 .. 51 Exhibit 4-9: LED Phosphors in Display Backlighting by Phosphor Type 2012-2019 ..................... 53 Exhibit 4-10: LED Phosphors in Display Backlighting by Phosphor Deposition Technology 20122019 ............................................................................................................................ 55

Exhibit 4-11: LED Phosphors in General Illumination by Phosphor Type 2012-2019 ................... 58 Exhibit 4-12: LED Phosphors in General Illumination by Phosphor Deposition Technology 20122019 ............................................................................................................................ 59 Exhibit 4-13: LED Phosphors in Outdoor Applications by Phosphor Type 2012-2019 .................. 61 Exhibit 4-14: LED Phosphors in Outdoor and Automotive Applications by Phosphor Deposition Technology 2012-2019 .................................................................................................. 63 Exhibit 4-15: Summary of LED Phosphors Market by Application 2012-2019 ............................. 64 Exhibit 4-16: Summary of LED Phosphors Market by Phosphor Type 2012-2019 ....................... 66 Exhibit 4-17: Summary of LED Phosphors Market by Phosphor Deposition Technology 2012-2019 .................................................................................................................................... 67 Page | iv

Executive Summary
E.1 Key Opportunities for LED Phosphors
NanoMarkets forecasts that the overall market for light-emitting diode (LED) phosphors used in LED lighting applications will grow from its base of about $525 million in 2012 to over $1.6 billion Page | 1 by the end of the forecast period in 2019. This increase represents a compound annual growth rate of approximately 17 percent. The projected growth is a direct result of a major shift that is taking place now and over the next decade toward more efficient, long-lifetime lighting. During this period, LED phosphor suppliers will enjoy an expanding market for their products: Many governments around the world are using the regulatory process to mandate higher efficiency lighting products. LEDs are, as a technology, potentially more efficient than almost any other alternative lighting technology, so government policies that force consumers to buy more efficient lighting products will lead to increased adoption of LED lighting. But on the demand side, in order for LED lighting to live up to its potential, better phosphors are needed, not only to further increase efficacies, but also to improve the consumers' perception of the quality of LED lighting. As the LED lighting market matures, we think that the strength of the demand for new phosphors is likely to grow, because LED bulbs are expensive. In a world in which a 60W equivalent light bulb costs tens of dollars today or perhaps under $10 each in the future, consumers will think more seriously about their purchasing decisions when buying new bulbs. In other words, consumers will expect more from a bulb that costs three to five times as much as a typical incandescent bulb, which is easily under .25 each, and they will expect the LED bulb to give them a light quality at least as good as the conventional technology.

We also note that in a world in which phosphors are one of the keys to differentiating the quality of LED lighting products, there are also plenty of incentives for new firms to try to get into this market. There are, at least in theory, many different types of phosphors that could conceivably be used in LED lighting applications, which means that even though the intellectual property space appears to be already very crowded, there is still plenty of room for new materials to be developed and patented. Although it has been around for a while, the LED lighting industry is still at a relatively early stage of technology and market development, so the barriers to entry for new phosphor firms are weak, and the potential for high margins is strong. We think that these trends will continue at least until the very long lifetimes of LED lighting products lead to a self-limiting of the addressable market, an eventuality that is well beyond the timeframe of this report. In the meantime, the opportunities for LED phosphor suppliers are significant, and are mostly centered on the following interrelated, key characteristics:

LED phosphors that provide better luminous efficacy, such as through higher internal quantum efficiency, will help LED lighting better compete for market share. Phosphors that fine-tune the emission in key parts of the visible spectrum that match up with human eye sensitivities, thereby avoiding "wasteful" efficacy-lowering emission, and phosphors with reduced Stokes and down-conversion losses associated with absorption from the LED and re-emission, represent key opportunities. Page | 2 Phosphors that provide better color rendering are also still in demand, especially in the general illumination and liquid crystal display (LCD) backlighting markets, where LEDs still perform poorly in comparison to the traditional incandescent bulb. In particular, stable, high quality red emitting phosphors are expected to be especially lucrative, and competitive, in the near- to mid-term. Finally, phosphors that enable LED lighting component manufacturers to better provide application-specific color temperatures are also needed. Historically, consumers have viewed LED lighting as cold and harshand indeed many early-to-market LED lighting products were accurately described using these termsand were not always judged attractive by consumers.

E.1.1 General Illumination Indoor and Outdoor

The sheer size and application variability in the general illumination market, which includes residential replacement bulbs and lamps, architectural and decorative applications, and commercial/industrial lighting applications, mean that many different types of phosphors (and phosphor suppliers) will find success. This sector is characterized by region- and applicationspecific requirements for light output quality and performance, although materials that enable both higher efficacies and warm emission with high color rendering indices (CRIs), especially for indoor applications, are a major trend. The ability to precisely fine-tune the stoichiometries of different phosphors has already led to the commercialization of many different phosphors, and customized phosphor combinations, in LED lighting applications. Continuation of this strategy will lead to even more moneymaking opportunities over the next decade for the phosphor industry. NanoMarkets projects that the value of the LED phosphors market in indoor and outdoor general illumination applications, excluding streetlights and automotive lighting, will grow from its relatively small base of just over $115 million in 2012 to over $1.1 billion by the end of the forecast period in 2019, at which time it will account for over 70 percent of the total market value.

E.1.2 Streetlights and Automotive Lighting

Although related to general illumination applications, LED-based lighting for streetlights and for automotive applications deserve a separate mention, because these two applications are characterized by somewhat different performance requirements. In particular, they both need high temperature stability phosphors to enable maximum brightness and long lifetimes, and they are less influenced by the need to match precise CRI and correlated color temperature (CCT) characteristics than are the consumer and architectural lighting markets: Today's typical LED-based streetlights already offer far superior color rendering ability than anything else on the market. In other words, there is little to be gained from efforts

to improve color quality through better CRI/CCT characteristics in the streetlighting sector. Instead, the opportunities for phosphors are centered on high stability and, in some cases, on phosphor uniformity in order to reduce eye fatigue while driving. In both the streetlighting and automotive headlamp applications, there is also little to be gained from a focus on pure efficacy improvements. While certainly luminous efficacy Page | 3 improvements are always appreciated, phosphor-coated LED lights already perform better than the popular sodium vapor, high-intensity discharge, or halogen-incandescent technologies used in these applications. Here again, the emphasis should be on temperature and environmental stability. In particular, the fact that high temperature stability is so critical implies opportunities for high quality aluminate-based phosphors, even though aluminates are generally more expensive than garnets.

NanoMarkets projects that the market value of LED phosphors for the streetlighting sector will grow steadily at a CAGR of approximately 17 percent from its value of about $67 million in 2012 to over $200 million by 2019. The market value in the automotive headlamps sector is expected to grow much more slowly, though, because of the more conservative nature and smaller addressable market size of the automotive sector, and is expected to hover around the $1 million mark for the timeframe of this report.

E.1.3 Display Backlighting

From the perspective of the LED phosphor suppliers, in contrast to the general illumination and streetlighting sectors, the display backlighting segment is in for some difficulty in the years ahead. LED-based backlighting has already nearly saturated the display segment, so there is little room to grow further. And, more importantly, a shift in favor of more direct-LED backlighting technologies over higher performance edge-lit schemes is steadily reducing the average number of LEDs per device faster than the underlying display segment is growing. This situation is leading to a shrinking addressable market for phosphors in LCD backlighting. NanoMarkets predicts that, barring any unexpected major changes in the underlying display markets, the market value of LED phosphors in displays will decline from its current value of about $340 million to about $280 million by 2019. This decline is due not only to the reduced number of LEDs-per-device required for direct-LED designs, but also to the following trends: The availability of higher-efficacy LEDs, although good for the consumer and the display manufacturer, also reduce the average required number of LEDs-per-device for a given brightness level. Reductions in LED phosphor prices are expected over time, because many of the latest materials are still considered to be in the early commercialization phase. Organic light emitting diode (OLED) displays, which are backlight-free, are already starting to take over some sub-segments of the display market. OLED displays already make up a significant portion of the mobile phone market, and they are expected to be increasingly adopted in other display segments over the next decade.

In the meantime, phosphor suppliers can hold onto market share and delay the onset of declining revenues for as long as possible by offering phosphor materials that convincingly improve the color gamut area available from phosphor-coated LED backlighting systems, which still suffer mightily in comparison to the color rendering from plasma, OLED, and RGB-LED designs. Here again, this goal can be achieved by providing more customized (and narrower emission) red phosphors, but also through new phosphors that work better with UV-LEDs and/or higher efficacy Page | 4 phosphors based on nanomaterials or other phosphor coating technology advancements.

E.2 Firms to Watch in LED Phosphors and Related Industries

The importance of phosphor technology to the emergent LED lighting industry is evident in the high level of patenting, licensing, cross-licensing, and patent infringement litigation activity that goes on among key industry players. Of course, pioneering LED phosphor firm Nichia is still a clear leader, but the "big three" lighting firms GE (U.S.), Philips (The Netherlands), and Osram (Germany), as well as more specialized firms like Toyoda Gosei (Japan), Cree (U.S.), Seoul Semiconductor (Korea), Optiled (Hong Kong), Intematix (U.S.), and others are now also in the mix. All of these firms continue to be major players in the LED market, either from the materials or the components side, or from both, and the generation (and licensing/cross-licensing) of additional IP along with the usual development and commercialization efforts continues in earnest. IP development is a cornerstone of the competitiveness of this industry. A key strategy for survival is to out-innovate the competition with new materials systems and platforms, and it does not hurt to have enough cash on hand to vigorously enforce and defend generated IP. Exhibit E-1 below contains a table with NanoMarkets' thoughts on some of the key firms to watch in the LED phosphors development space.

Exhibit E-1: Selected Key Firms to Watch in the LED Phosphors Market
Firm Cree (U.S.) Products LED components, IP NanoMarkets' Analysis Cree is no longer the first or second largest LED manufacturerit has dropped down to about third or fourth in linebut it does have a strong reputation for outinnovating other players in the LED space. NanoMarkets expects that it will continue to be an important pioneer for adoption of new phosphor technologies, and we expect that it will continue to maintain strong relationships with key suppliers (like Intematix) and development/licensing partners (like Philips). Dow recently acquired SRI International/Sarnoff Corporation (U.S.) spinoff Lightscape Materials after forming an LED technologies business unit in the last quarter of 2011. The acquisition appears to be part of a broader Dow strategy to expand and augment its LED materials business. It is too early to tell whether or not the acquired Lightscape technology will be a major factor in the LED phosphors market, but Dow does have the financial resources and the supply chain, service, and support capabilities to establish itself in the market quickly.

Dow Electronic Materials (U.S.)

LED phosphors, new entrant

Exhibit E-1: Selected Key Firms to Watch in the LED Phosphors Market
Firm Intematix (U.S.) Products LED phosphors, remote phosphor components NanoMarkets' Analysis Intematix is one of only a few "pure play" phosphor companies, and it is certainly one of the biggest. It also has the broadest product portfolio and is one of the major participants in the licensing/litigation culture of the LED industry. Intematix has also recently made a value-added, downstream move with its launch of remote phosphor components. Traditionally, most LED lighting firms fabricated their own remote phosphor coatings (if they used them), often under license from Intematix (or Cree). With Intematix's new business strategy, a wider array of LED makers can now opt for remote technology without having to establish their own manufacturing processes. MCC is currently battling with Intematix for control of the high stability/high efficacy red nitride phosphors, which represent a key enabler of warm white/high CRI general illumination applications. Nichia's hold on the LED phosphor market is largely due to its control of key garnet (YAG)-based phosphor technology. Although some patents are expired or expiring soon, Nichia has taken the position that all those wishing to use garnets must first go through Nichia. Because garnets are still the most widely used phosphor, Nichia's grip on the market is substantial. Nichia is also a key maker of LED components for lighting applications; as such, any directions taken by Nichia with respect to phosphor materials have major implications on the phosphors market as a whole. Osram is a key firm to watch based on its (current) position as the largest LED manufacturer in the world. In addition, Osram has a reputation for innovation, quality and customer service, which could help it retain its position of authority, but we think that Osram should carefully avoid resting on its laurels as the biggest supplier, even as it may be reeling from internal turmoil resulting from last years' LED supply problems, Chinese competition, and the fact that its parent company (Siemens) has been trying to sell it or spin it off. Osram cannot ignore its technology development programs or it risks being surpassed by Philips, Cree, and others, with respect to innovation. Philips is a major producer of LED lighting products, and a clear leader in the generation of LED lighting-related expertise and IP. Philips' LED components remain the industry standard in terms of quality and lifetime, and Philips was an early adopter of remote phosphor technologies under cross-licensing agreement(s) with Cree. As such, any moves that Philips makes, especially in the general illumination sectors, can be taken as signals that indicate the direction(s) that the rest of the industry will take.

Page | 5

Mitsubishi Chemical Corporation (Japan) Nichia (Japan)

LED components, LED phosphors (especially red nitride phosphors, captive use) LED components and IP

Osram Opto Semiconductors (Germany)

LED components, LED phosphors (captive use)

Philips Lumileds (The Netherlands)

LED components and downstream LED lighting products, LED phosphors (captive use)

Source: NanoMarkets

E.3 Thoughts on China as a Supplier and User of LED Phosphors

China's control of the rare earth supply has thus far had minimal impact on the LED phosphor market. Only very small quantities of rare earths are used on a per-unit basis in LEDs, and LEDs use far less rare earths than CFLs, so higher rare earth prices, which have indeed appeared over the last 18 months or so, may actually encourage faster adoption of LED lighting over CFLs in key lighting applications. In fact, we are not convinced that the "China problem" is much of a problem Page | 6 at all, at least from the perspective of the LED phosphor industry. But perhaps more importantly, today, large quantities of LED components, and even more downstream LED lighting products, are made in China anyway, so China's near monopoly on the supply of rare earths has less effect than it might if more actual production were done in Europe, North America, and Japan. In fact, some of the biggest Western LED component and materials makers like Cree and Intematix already have established manufacturing capability in China. In addition, Osram just recently announced plans to build a plant in China. If the rare earth problem intensifies, we think that the industry can very quickly establish additional LED and LED phosphor manufacturing within China, making it unnecessary to export large quantities of rare earths for LED phosphor production, anyway. In fact, this shift has already occurred to a significant extent. Chinese LED phosphor suppliers, such as Beijing Yuji Science & Technology, Dongtai Tianyuan Fluorescent Materials Co., and Xi'an Shenguang Yuji Electronic and Technology Co., to name just a few, are emerging as significant competition to the status quo. The quality of the phosphors from Chinese suppliers varies greatly, but it is expected to continually improve, in no small part because of China's dedication to improving its domestic "high tech" manufacturing base.

E.4 Summary of Eight-Year Forecasts for LED Phosphors

Exhibit E-2 contains a summary of the eight-year LED phosphor market forecasts by application category, in value terms. Note that the compound annual growth rate (CAGR) in the value of the LED phosphor market is expected to increase from about 12 percent in 2012 to nearly 20 percent by the end of the forecast period. This increase is due to increased adoption rates for LED lighting in the general illumination categories as the market matures.

SUMMARY: The LED Phosphors Market

1,800.0 Market Value ($ Millions) 1,600.0 1,400.0 1,200.0 1,000.0 800.0 600.0 400.0 200.0 0.0 2012 2013 2014 2015 2016 2017 2018 2019 Year NanoMarkets 2012 3,000.0 2,500.0 2,000.0 1,500.0 1,000.0 500.0 0.0

Volumes (Metric Tons)

Page | 9 Volumes (Right Axis) Market Value (Left Axis)

Chapter One: Introduction

1.1 Background to This Report: A Time of New Opportunities for LED Phosphor Makers
NanoMarkets believes that major opportunities are currently emerging for LED phosphor Page | 10 manufacturers. Broadly speaking, these opportunities are being driven by three factors: The underlying market for these phosphors is rapidly growing Phosphor performance and characteristics are vital to the success of LED lighting products; and It is still possible for phosphor makers to create proprietary products and brands that can give these firms superior margins.

With regard to the first point, LED backlighting is already well established. However, many governments around the world are promoting the use of LED lighting in general illumination through regulations designed to force a phase-out of less-efficient incandescent lighting. Bans (or reductions) on incandescent lighting are going into effector have gone into effectin many countries. Nonetheless, despite this huge push, LED light quality is not well-liked by many consumers.

1.1.1 Phosphors Enable the LED Industry

In NanoMarkets' view, this situation is creating an opportunity for LED phosphor manufacturers, because the choice of phosphors can impact the efficacy, correlated color temperature (CCT), color rendering index (CRI), and the color quality system (CQS) of LED lighting. LED phosphor manufacturers therefore, stand to benefit considerably with any strategy that can promote phosphors as a key enabler for the LED makers to gain market share: The specific choice of phosphor is strongly related to efficacy, which opens up opportunities for phosphor manufacturers to create value by developing and commercializing products that help LED manufacturers improve their products' performance. Today's standard white LED lighting product is made by down conversion of an indium-gallium-nitride (InGaN) blue emission LED with a coating or filter of yellow phosphor to create a white emission. Down conversion at least partially reduces overall luminous efficacy compared to the original blue LED. Light quality is inextricably linked to the choices of phosphors available to LED manufacturers. New phosphor deposition technologies are being sought that improve emission uniformity. Phosphor technologies that widen the viewing angle of LED lighting products would also increase penetration rates for LEDs in the general illumination market. LED color temperature and color rendering can also vary with viewing angle. This effect sometimes makes the experience of being in an LED-lighted room less than satisfactory, or it can reduce the color gamut of LED-backlit displays.

1.1.2 LED Phosphors: Not Just a Volume Play

But in NanoMarkets' opinion, the phosphor business is exciting because it is not just a volume play, but also a business in which there is still plenty of room for phosphor firms to create proprietary/intellectual property (IP) protected products: In particular, the LED lighting market is still open to new types of proprietary phosphor Page | 11 solutions, with the potential for phosphor firms to build their brands and create protectable IP. NanoMarkets believes that some phosphor suppliers will be able to break away from the rest by not only doing the obvious things, like improving performance and color gamut of their phosphor offerings, but also by establishing more downstream or value-added products, which can be done as a way to both capture more value and hedge against IP battles. The Intematix move toward selling phosphor-coated components for use in its remote phosphor technology is a key example of this trend. Display backlighting, streetlights, and general illumination each have their own requirements for color rendering and color temperature. As a result, we see an ongoing opportunity for phosphor firms to create products that are better able to provide the most appropriate CCT and CRI/CQS values for the various applications.

1.1.3 LED Phosphors: Material Trends

LED phosphor technologies can be broadly separated into the following categories based on the inorganic lattice or matrix composition. And, while each type of phosphor will benefit from the general trends and opportunities set out above, each also has its own unique roadmap. Garnets: Garnet-based phosphors are the industry standard and can be found in almost all lighting applications. The yellow garnet phosphors, mostly cerium-doped garnets (YAG:Ce), make up the bulk of the phosphors used in LED lighting today, in combination with blue InGaN LEDs. These phosphors are already widely available, and the procedures for manufacturing and using them are well established. However, NanoMarkets notes there has been a trend towards improving the light quality towards warm color temperature by using yellow garnet phosphors in combination with europium-doped red nitrides. However, we also believe it is an open question as to how long this trend will continue: New materials are likely to replace the widespread use of garnets. IP surrounding the use of garnets is heavily controlled by the key LED firm Nichia. As a result, some LED manufacturers may opt for lower-performance silicate dopants as an alternative to obtaining a license from Nichia.

Silicates: The silicate-based phosphors are mostly europium-doped, but other dopants are also used. The silicates come in a variety of colors, but mostly orange, yellow and green, and are known for high brightness, although they may suffer at high temperatures. NanoMarkets believes two key facts will shape the markets for silicate-based phosphors:

Silicates are particularly important in LCD backlighting applications because of their brightness. However, we note that LED-based backlighting is now beginning to reach full penetration in many display types, which may slow down the market for silicate phosphors somewhat. Silicate phosphors are generally only used for cool white systems, which is more Page | 12 important in Asian markets than in European or American ones, which is another limitation on this kind of phosphor. On the other hand, Asia is perhaps the largest market for LEDs at the present time.

Aluminates: Most of the aluminate phosphors are either green or yellow, and like the garnets, they must be used in combination with red phosphors to achieve high CRI white emission. These phosphors are more expensive than the garnets, but have high stability (thermal and environmental), so are most suitable for high power LEDs and outdoor lighting markets, and they give the best possible CRI and light quality when used with the right red phosphor. Nitrides and oxynitrides: The nitrides, especially europium-doped (oxy)nitrides, represent a key development, in particular high quality, high purity red nitride phosphors that can be used with the classic blue LED plus YAG:Ce system to create better, warmer light with minimal reductions in efficacy. The red nitrides can also be used in combination with yellow aluminates and silicates for the same effect. Sulfides and selenides: These phosphor types are problematic because of manufacturing issues surrounding the use of toxic hydrogen sulfide/selenide gas, the generation of sulfide and selenide waste products, and the fact that these phosphors tend to be more humidity sensitive than the ceramic phosphors (aluminates, garnets, nitrides, etc.). Although red europium-doped sulfides are useful for conversion of cool white LEDs to warmer CCTs, these phosphors must also compete with less problematic europium-doped nitrides for the same application(s). Green emitting copper and aluminum doped zinc sulfides (ZnS:Cu,Al) can be used in combination with UV/NUV-emitting LEDs (along with other non-sulfide phosphors) to create white emission without the use of classic, blue InGaN LEDs. Overall, NanoMarkets' understanding is that both the development and the use of sulfide/selenide-based phosphors is on the decline, at least in the LED lighting industry. Others: A myriad of other phosphor technologies, too varied to discuss individually and generally outside the scope of this report, are also in varying stages of development and commercialization. Most, however, are still in the R&D stage, and not generating significant revenues today. Some potentially promising alternative phosphor technologies include the following: Quantum dots (QDs), while not classically phosphors, may be used in much the same way as LED phosphor coatings on LEDs to down-convert to white emission. They have the potential to be highly tunable with unparalleled color rendering, but they still suffer from high cost, short lifetimes, unrealized efficacy, and, most importantly, they are not currently widely commercially available on a large scale.

GE's manganese-doped fluoride red phosphor may compete with other, up-and-coming red nitrides in the rush to close the warm white technology gap that still exists in much of the LED market today. Importantly, it is rare earth-free. Nanoscale phosphors can improve significantly upon the performance of their nonnanoscale counterparts with respect to efficacy. Page | 13 "Hybrid" phosphor technologies that combine the characteristics of both the classic inorganic phosphor coatings with polymeric phosphors and/or quantum dot phosphors have the potential to allow LED makers to further fine-tune and optimize emissions for particular applications.

1.1.4 Phosphor Technology: Still Improving

All of the drivers for the LED phosphor industry mentioned above are being amplified by ongoing performance improvements that began during the past year or so. For example, Intematix has introduced a new deep red phosphor that enables the production of LEDs with 98 CRI and 2700 K CCTindeed very high quality, warm white light. And by the end of 2012, Philips says it will be selling a dimmable, warm white, 100-W equivalent bulb (1700 lumens and 23 W) with 20+-year lifetime under the name "EnduraLED". The price of this bulb is estimated to be under $50. Such developments are setting increasingly high standards for both the LED lighting industry and the LED phosphor industry that supplies it.

1.2 Objectives and Scope of This Report

The purpose of this report is to examine the opportunities and challenges for manufacturers of phosphors used in LED lighting applications over the next eight years. Specifically, this report provides a market analysis of recent developments in the LED phosphor industry. In the report, we examine the latest products, strategies and technical developments of the industry. We identify how performance improvements are likely to speed adoption of LED lighting as traditional, inefficient incandescent lighting is phased out, and how changes in the phosphors industry are likely to improve LED lighting's chances against other, emerging alternative lighting technologies. Specifically, we examine the potential opportunities for phosphors in the following key LED applications: Display backlighting, Street lighting and other outdoor applications, and General illumination applications.

In all of these applications, which require white LEDs, the demands on phosphors are different, so we consider each application area individually. The report also appraises the commercial significance of the notable developments that have taken place within the LED lighting industry that are directly related to improvements or changes in phosphor technologies, such as the availability of new red phosphors that enable the fabrication of "warm", high-brightness, high quality white LEDs. In addition, the report includes NanoMarkets' assessments of the strategies of leading firms active in the LED phosphors space.