Lighting is going horizontal. And ShineOn wants to control the middle tier of the business.
The Chinese company, which has raised $51.5 million in two rounds from investors such as Mayfield Fund and IDG-Accel Capital, specializes in packaging. Packaging sounds pedestrian -- it's a box, right? -- but it actually involves designing and creating circuit boards, phosphor lenses and other components that surround the LED itself. Once the LED (the actual light source) is placed in its packaging, a bulb or lamp can be built around it.
"It is optical, electrical and thermal packaging. [...] It is a combination of understanding lighting and phosphors," said Navin Chaddha, a partner at Mayfield. "Think of them like Asus. Intel makes the chips, but Asus made the motherboards."
ShineOn currently concentrates mostly on components for LEDs for TVs and monitors and will move over time to mass-produce components for general lighting.
The LED market is still to some degree a vertical one with companies like Philips, Osram and Cree making LED chips, packaging, bulbs and in many cases lamps too. But as the market grows, manufacturers will further dig into niches, similar to how computer companies did in the '80s and '90s and as solar has increasingly started to do.
"There is going to be horizontalization," said Chaddha.
What segments will earn the lion's share of the profits in a horizontal lighting market? It's hard to say at this point. Mastering the epitaxial, or crystal growing, techniques for producing high-brightness LEDs remains an art, giving an advantage to companies like Cree and Osram that have figured it out. Still, several startups and giants like Samsung have entered the market. Fierce competition and a profitless prosperity, similar to life in the DRAM or flash memory markets, could become the future for many.
On the other end of the spectrum, companies like Lunera (fashionable office lights) and Dialight (industrial lights) have shown it is possible to bake intellectual property into lamps and light fixtures. Digital Lumens, meanwhile, has built an industrial-scale lamp and a ZigBee mesh network for controlling them.
Middlemen could make it, too. Look at the Asus example. It was once a faceless component monkey, but now sells mainstream products under its own brand at Best Buy. (And let's not forget staying vertical. LED bulbs will last a decade. A meaningful replacement market for LED bulbs won't exist. Thus, manufacturers will have to garner as much revenue and margin as they can at the first, and only, sales opportunity.)
Mayfield will likely stay closer to the chip end of things. It has an investment in LatticePower, which makes LED chips, and now has one in ShineOn. Conceivably, the firm could invest in a company producing industrial lights or streetlights, but don't expect to see a general lighting announcement.
ShineOn's main competitor is a public company called Everlight in Taiwan. Bridgelux, the U.S.-based LED maker, can also be considered a competitor. Bridgelux makes its own LED chips, but it is also known for its low-cost packaging. Intematix also makes LED packaging materials, but its stock-in-trade is mostly phosphors -- in fact, it supplies phosphor chemicals to ShineOn.