optoelec0.JPGAlthough many have heard of LEDs, and are ready to buy the more efficient, environmentally friendly lights, commercializing the technology has proved a tougher road.

Optoelectronix, a Silicon Valley company, is one of the first small startups I’ve seen show up that’s ready to start manufacturing and selling LEDs, rather than just researching them. Investments into LED by venture capital firms so far have been toward developing specific LED technologies, rather than bringing LEDs to stores.

The San Jose, Calif., company has just raised $6 million in a first full round of capital from private unnamed investors.

Commercializing LEDs is challenging. Rather than a simple bulb with a hot wire, LEDs are actually made up of several parts, including a thermal management system used to vent the heat, a lens to diffract the light, electronics and the semiconductor that actually produces the light. The CEO of Optoelectronix, Chuck Berghoff, told me these complexities often mean a “complete disconnect” between what lighting fixture makers know how to do — traditional light bulbs — and “what the hell to do with a pile of semiconductor chips.”

The Optoelectronix team, made up of former employees of Siemens, got its start custom-building LEDs for specialized applications. However, with costs going down and quality going up for various components, as well as a growing market demand, the company is ready to start mass-producing lights. They do the optical, electronic and thermal design in-house, but buy the various parts from other companies.

The question is where LEDs will initially sell best. Consumers are rapidly becoming interested in the technology, especially when they hear about the mercury contained in compact fluorescents. Unfortunately, LEDs are still significantly more expensive than either incandescents or CFLs, which can turn off people used to buying a pack of bulbs for a few bucks.

Businesses are more likely to do the kind of cost analysis needed to reveal that, due to their long lifetime, reliability and high efficiency, LEDs are ultimately cheaper than other forms of lighting. That means businesses focused on long-term cost savings might be more likely to adopt LEDs before consumers. Some cities, in fact, driven by the same cost calculations, have already started retrofitting their streetlights with LEDs.

Berghoff is confident that businesses with large lightning needs, like department stores and warehouses, will quickly pick up on LEDs. However, he thinks the consumer market is set to explode within several years, due in part to the directional lighting capabilities of LEDs, which focus light where it’s needed. “Once designers start to understand the technology and how to work with it, we’ll get to a point of efficiency we’ve never had before,” he says.
Competitors include Philips Lumileds, a large LED manufacturer that has been around for decades. Originally, that company started as an LED subsidiary of Hewlett-Packard. In 1999, HP spun out Agilent Technologies, which took ownership of the LED business. That same year, Agilent created an LED lighting joint venture with Philips Electronics. Philips bought out the Agilent share in 2005. Philips Lumileds is also trying to get LEDs to replace light bulbs in all sorts of lighting, from car headlights to traffic signals and mood lighting.