Neo-Neon is a traditional lighting and decorative lighting company with a three-decade long history in the lighting industry. It houses an approximate of 4,700 customers worldwide with presence extended to LED sector for 6-7 years. Neo-Neon currently produces about 600-700mn light bulbs per month with one-fifth of them as LED-powered. It also performs OEM production for leading brands.

LEDinside recently had the opportunity to interview with Neo-Neon Taiwan branch president Randy Cheng (鄭建文) to talk about company’s deployment and strategy in LED deployment.

LED lighting not a handicraft

Neo-Neon has a clear position in LED market, said Cheng. The company understands well that it its presence in the LED sector is based on its role in the traditional lighting business. Since all existing customers at the company are traditional lighting applications companies, many of them used to think that LED lighting is just a light bulb-LED conversion. Therefore, Neo-Neon has a distinct definition for its position and marketing strategies than other LED makers.

As LED companies are more technology-driven with more resources being devoted on R&D, corresponding marketing strategies will be different than traditional lighting companies. Neo-Neon realizes that it has to create a path that they could built on their well-established experience in the lighting business and ride on any business potential from new technology/trend.

“We cannot sell LED lighting as handicraft,” Cheng stressed. A LED lighting that only has its selling point built on environmental-friendly concept is not powerful enough to gain penetration from traditional lighting, he added.

LED companies are mostly eyeing the premium group of customers due to its relatively high ASP. But Neo-Neon believes that this group of customers will look for lower-price LED products if quality is guaranteed.

Whereas for customers in mainstream and entry-level segments, their consumption pattern can be hardly changed. Neo-Neon therefore has its targeted markets set as the mainstream and entry-level markets. More resources thus being allotted to develop customers from these market segments.

Broad LED lighting product line helps to grow market acceptance

Good products will gain market acceptance regardless whether marketing budget is being devoted or not, said Cheng. Any LED lighting that delivers a good P/P (price to performance) ratio is a “good” product, he defined. Many LED companies might have budgeted considerable R&D resources and investment on LED lighting, but they did not ever achieve a mass penetration, Cheng pointed out. This is because the fundamental value of LED lighting is built on lighting. A big price gap between traditional lighting thus determines its penetration rate.

Marketing strategy is unnecessary if the product itself has selling points, Cheng stressed. Under this belief, Neo-Neon does not think issues such as heat dissipation nor add-on features will affect its designs. The ultimate decision for whether a LED lighting application has selling points or not will be judged by marketing team, Cheng said.

Two business models thus being derived, with one being led by surveys and led by R&D. Under the first model, if salespersons estimated that the ASP ceiling is NT$10 but R&D team find that cost is US$12 after conducting surveys, the final decision will be passed on to customers. If customers are reluctant on cost, Neo-Neon will still strive to suppress the cost. The other model is driven by R&D. R&D will propose different designs for marketing team to gather required information to make marketing works practical.

Paradox of known and unknown

Fundamental feature of a LED lighting is built on luminance, said Cheng. “Relationship of LED and traditional lighting is similar to an Earth-moon repulsion/gravitation force,” he described. It is often to see LED lighting experts do not understand lighting principles and vice versa, he added. Those from the LED lighting industry always pursue for luminance but those from the traditional lighting industry eye on cost. Neo-Neon is dedicated to create an overlap, or in another word, to create a product that addresses key issues including power efficiency, environmental hazard and price.

Although there still requires lots of compromises, hidden opportunities also exist. LED is a catalyst to broaden present traditional lighting channels. Market leaders such as Philips and Osram beef up on their presences in the LED business on their sound achievements in traditional lighting business. Both companies are aware about that the substantial business potential and are understand well that environmental-friendly concepts are not the sole driving force for success.

Cheng reiterated that Neo-Neon marks its presence as a traditional lighting company. Since most customers source from channels, they usually supply valuable messages, he said. In some cases, some leading IT companies might not able to understand customers’ demand well. Some of them might not realize that landscape lighting customers have a stronger sense on demand than producers themselves. Price is not a concern for these customers as they have their measures to pass on their costs to end customers, he explained.

Cheng indicated that Neo-Neon’s growth is built on the aforementioned customers. These customers have help portraying a big picture of future market, he added. Base on customers’ comments, Neo-Neon has classified its LED lighting into RGB and white segments. The company spends six months’ time and several hundred millions of budget (in yuan) to develop required modules in order to produce a complete product lineup. A close tie with customers is also always bear in mind, Cheng stressed.

High component sufficiency

For Neo-Neon itself, its extended presence to the LED sector is natural. The company was prompted to extend beyond traditional lighting as LED makers did not have sufficient capacity backup in the past. Currently Neo-Neon does LED packaging in house with only a limited of its produced LEDs being sold to third parties.

Thanks an economy scale of production, Neo-Neon is sufficient on all LED-related component products ranging from wire, PCB and moding tools. LEDinside estimated that Neo-Neon has over 80% of its component as in-house produced.

Regarding LED wafer deployment, Neo-Neon will have its epi-wafer plant at Jiangmen, China to commence official production in October. The company has already booked more than 10 sets of MOCVD equipment during late 2007. Capacity at the Jiangmen plant is scheduled to be 12,500 wafers, or ~400mn dies - an amount is far lower than its required amount.

Neo-Neon’s China LED factory

Rapid demand surge in commercial lighting

Cheng foresees that demand for commercial lighting will gain faster penetration in Europe and the US. Of which, Europe will lead the growth as a stronger environmental awareness is deep rooted in the region. The company has already made some achievements in the commercial lighting segment. It has already landed some projects from commercial buildings and more commercial-use decoration projects. Cheng anticipates a flourish LED commercial lighting market in the future.

For in-door lighting market, Neo-Neon is also eyeing potential from replacement demand. Cheng noted that the company’s MR series LED is well prepared to ride on the future boom. Although the in-door LED lighting market is still in its infantry stage, Neo-Neon regards this is as a segment that should create new opportunities.

Cheng believes that commercial lighting should lead among other LED lighting segments in terms of replacement demand. A meaningful penetration is likely to emerge in two years but a mass penetration should be only seen after five years. This is because many technology issues will be involved in commercial/space lighting design.