Analyzing the parts costs for LED bulbs: Where’s the profit?

LED bulb cost is a factor in the adoption of LED replacement light bulbs. The entrenched technologies of incandescent and CFL bulbs have such a low initial purchase price that the first versions of LED bulbs, priced at $40 and up, were doomed to novelty status.  So the constant move downward in LED bulb prices is a very good thing for the acceptance of LED bulbs by consumers.

But it also makes you wonder – where is the bulb’s profit for the manufacturers? Take a look at the Cree 60W bulb, which is made by one of the world’s dominant LED manufacturers (and probably no other bulb manufacturer gets a better price on individual LEDs).  Each bulb uses 20 XT-E LEDs that sell in volume for “well under a dollar.” So let’s just pick a figure of $.75 each as the LED cost, or $15 in LED parts. Hmmm, that can’t be right – this bulb sells at Home Depot for $13.

A respected industry source (RIS) put together a detailed cost breakdown, first with actual dollar amounts and later as percentages, that looks pretty accurate and shared it with me. (This cost breakdown is not specifically for the Cree bulb, but representative of the pricing for LED bulb technology.)

A non-isolated bulb design, in 1MU volumes:

  Part   Cost 
  LED Driver IC   $0.30
  Drive circuit components   $1.10
  EMI filter circuitry   $1.30
  PCB   $0.45
  LEDs   $2.00
  Aluminum heat sink   $1.35
  Plastic lens cover   $0.65
  Labor/Assembly   $1.55
  Profit (?)   $0.40


…for a total of $9.10, much closer to Home Depot’s selling price and allowing for its profit. Note the estimate of $2.00 for all of the LEDs used in the bulb — A far cry from the $.75 each for LEDs in quantities of, say, a mere 100K.

In an attempt to generalize the cost breakdown further, RIS said: 

“To understand the cost drivers involved, you need to take a look at the key cost factors for its construction. Generally speaking, in percentage terms, for a non-isolated version these would be:

Description

Share of total cost

LEDS

23%

Labor & Assembly

18%

Heat sink

16%

LED Driver IC & Externals

16%

EMI Filter circuitry

15%

Plastic Lens Cover

7%

PCB

5%

[These don't exactly match the above dollar figures because some follow-on head-scratching went on in the interim.]

“It’s clear that almost 90% of the cost factors are in the LEDs, the heat sink, the LED driver and associated components, and the EMI filter. Furthermore, they are very close to each other in costs.” So, the take-away here is that there is no one single cost factor driving the total cost of a bulb. To bring the total cost down, incremental reductions across all these items must be made – something not so easy to do.

Also note the assumption that the inexpensive LED bulb versions will be non-isolated. I’ve heard from several design veterans who are uneasy about safety issues in non-isolated bulbs, and RIS is among their ranks. He said, “Producing a non-isolated 60W-replacement LED bulb is a lot easier and cheaper than an isolated one. However, I cannot help but wonder when it is that some consumer actually gets killed from a non-isolated version – despite the claims by the manufactures that they cannot get through their casing material to get a live connection.”

Next article: What can a designer do to ensure safety and circuit protection in a non-isolated bulb? UPDATE: Non-isolated driver protection for LED lamps (bulbs).

Comments

  1. As engineers we should always be concerned with safety, however, the incandescent bulb has never been “isolated”. The difference is of course that an LED bulb will continue to operate with the case broken and circuit exposed versus an incandescent that will blow out, removing any desire to keep it running. I.e. it will get replaced. Where this would concern me most is in outdoor operation with wet ground and no isolation.

    Looking at some of the costs here, they seem high. In 1mu quantities, I don’t see EMI filtering at $1.30 for this power level and I don’t see a die cast aluminum heat sink, at least the one in the Cree bulb being at that price either.

  2. Gavin Perry says:

    Cree bulb is made to snap together. Probably automated assembly. Thus labor cost is likely to be less than $1 per bulb.