Agricultural Applications – A Promising New Outlet for Taiwan’s LEDs

For Amcham

Lighting for growing food indoors in plant factories is expected to be a rapidly growing industry in the coming years.

BY JENS KASTNER

Taiwanese LED makers have lately been suffering from the termination of Chinese subsidies for energy-efficient home appliances, China’s heavy subsidization of its own LED industry, and a resulting market oversupply that has driven down prices. But growth in a business sector that is still very much a niche application for LEDs could soon provide a partial answer to their difficulties.

The global proliferation of “plant factories” is increasing demand for related equipment, and LEDs – which bring the crucial advantage of enabling lighting to be adjusted according to the specific needs of a given crop – have a key role to play in that trend. Reflecting the growing demand, major international players such as Philips, Osram, and Panasonic have been entering the LED agricultural lighting market. Analysts say that if Taiwan’s LED makers were to team up with local agricultural firms and research institutes, they too would be well-positioned to get their share of the business.

“Chinese firms could likely always produce LEDs more cheaply, but plant factories involve more than lighting – namely farming, marketing, and R&D on such factors as humidity, nutrition, and temperature,” says Janis Lin, a market researcher with the Taipei-based market consulting firm Topology Research Institute (TRI). “Taiwan is in a favorable position in this regard, as the well-established cooperation here between industry and academia facilitates the crafting of one-stop solutions for plant factories.”

Underscoring both the application’s potential for rapid growth and the current small size of the market, TRI forecasts that global sales of LED agricultural lighting products will more than triple next year, reaching US$35.9 million, up from a value of US$11.5 million this year. The projection foresees the figure ballooning to US$305.8 million by 2017.

The concept of growing food indoors with artificial lights was first nurtured by the U.S. National Aeronautics and Space Administration (NASA), which sought to find a replacement for sunlight as a means of providing food for space missions, as well as by some northern European countries seeking to supplement the meager sunlight available during their gloomy winter months. In addition, growers of marijuana were early adopters of this novel technique, so as to help keep their illegal production more safely hidden indoors.

Over the course of the last several decades, Japan has set up over 200 large-scale plant factories, partly as a strategic response to its precarious reliance on food imports from China, and partly to help assure food safety and security in general. Earlier than most others, Japanese consumers have appreciated that plants grown indoors do not need pesticides, are not exposed to contaminated soil and acid rain, and are not bound by the dictates of seasonal changes.

Koreans subsequently became similarly supportive of vegetables grown in plant factories, with many supermarkets in the country now growing lettuce on the actual retail shelves. Given the grave levels of pollution in many parts of China, the mainland is now expected to follow in the footsteps of Japan and Korea, but on a much larger scale. Elsewhere in the world, the attractiveness of food factories may be boosted mainly by climate change and rising land prices.

In most cases, for the growing of both fruits and vegetables, LEDs are the ideal solution for such factories, as they can provide the specific blue and red light wavelengths needed for photosynthesis. Other artificial light sources, such as high-pressure sodium lights or conventional fluorescent lights, emit the entire wavelength spectrum from ultraviolet to infrared, which wastes energy and might even harm the plant.

“Different crops at their different growth stages require different wavelengths and different intensities of light,” explains Lin. “You add a bit more blue and reduce red a bit, and you may eventually find the right wavelengths,” which then shorten the growing cycle and enhance quality. She adds that only with such research does the use of agricultural LEDs become commercially feasible, as they are still significantly more expensive than competing light sources.

Hsinchu-based Epistar Corp., one of Taiwan’s largest LED chip suppliers, has been producing chips for agricultural LEDs since 2008 in cooperation with “Europe’s biggest lighting brand,” according to Chen Hsin-Kang, Project Director of Epistar’s Product Management Division. Although the company has customers for chips for agricultural applications in Europe, Japan, China, and North America, such chips still account for less than 2% of Epistar’s overall revenue, he notes.

“However, this [revenue] is expected to grow markedly starting around 2015, together with the rising penetration rate for LEDs in agricultural and horticultural lighting applications,” Chen predicts. Although the technology is already available, consumers will need another year or two before being able to accept the notion of plant factory food, he says.

Chen expresses confidence that customers won’t desert Epistar for Chinese competitors because Epistar’s chips’ “wall-plug efficiency” is considerably higher. While conventional fluorescent lights may turn 70% of the electricity into heat and only 30% into light (of which more light is then wasted because crops absorb some particular wavelengths only), LEDs have become ever more efficient, with Epistar’s mass-produced red and blue power chips now reaching an efficiency ratio of 50%, Chen notes.

“In recent years we’ve been achieving an annual increase in efficiency of around 15% for deep red LEDs, and our R&D roadmap sees our newest chip reaching about 60% next year,” says Chen. “Of course, cost is another important issue, but only with such efficiency will the plants grow well in the first place.”

Chen is also optimistic about Epistar’s ability to maintain its technology edge in horticultural and agricultural applications. He points to the company’s more than 2,000 patents, and its strong team of engineers and scientists, many of them with Ph.D.s, as providing a competitive advantage.

Orchids and lettuce

Another Taiwanese player in the LED business with experience in both agricultural and horticultural applications is Taipei-based Aeon Lighting Technology. ALT produces a standard “grow light” with a fixed wavelength combination, but customizes the combination according to the customer’s specific needs. Although agricultural and horticultural lights’ share of ALT’s revenue is still tiny, says Jack Lin, director of ALT’s sales department, the application warrants the company’s attention because of Taiwan’s lucrative orchid industry, as well as the potential for the production of Western-style lettuce that local upmarket restaurants and hotels would otherwise have to import at relatively high cost since it is difficult to grow outdoors in Taiwan’s climate.

“So far most customers for our grow lights have been end-users in Japan, with whom we have cooperated in R&D,” Lin notes. “They have many specific demands, with one client seeking to repel pests with the help of LEDs and another wanting to make his chickens lay eggs 24/7, for example.”

Lin adds that the fishing industry also represents a market for ALT’s LEDs, as different marine species are attracted to different wavelengths and light intensities.

Unlike Epistar, however, ALT doesn’t expect LEDs for plant factories to play a substantial role in the company’s overall business any time soon. Much more attention will continue to be paid to the firm’s core business of general and industrial lighting for a long while to come, says Lin. “It’s true that LEDs for plant factories are 50% more expensive than other ones, while the production cost is about the same,” he notes. “But the design process costs more, as it involves a lot more discussion with the end-user.”

Some Taiwanese LED makers have complained that they supplied equipment to local agricultural and horticultural organizations in the expectation of fruitful R&D feedback, but that collaboration never materialized. The apparent reason was reluctance among entrepreneurs in the Taiwanese farming sector to share information because of concerns about intellectual property rights protection.

To help bridge such gaps between LED makers and farmers, the Hsinchu-based Industrial Technology Research Institute (ITRI), a government-sponsored nonprofit organization engaging in applied research and technical services, last year established the Agriculture Fisheries Livestock Alliance-LED (AFLA-LED). The membership currently includes 26 LED suppliers, LED chip makers, and farming enterprises.

“The LED manufacturers do not sufficiently understand farmers’ needs, and farmers do not understand the advantages that the new technologies can bring,” says James Chu, president of AFLA-LED and division director of ITRI’s Electronics and Optoelectronics Research Laboratories. “So AFLA-LED can come in and provide an exchange and communication platform between the two. This then creates the mutual trust imperative for smooth technological cooperation.”

The ITRI-led alliance is currently undertaking several projects. One involves research into how adjustments in LED wavelengths can maximize quality and enhance plant growth in the production of greenhouse strawberries. “With LEDs, the strawberry can become whatever the consumer prefers – sweeter or sourer, harder or softer, or redder or less red,” explains Chu. “The market price rises accordingly.”

Another R&D project involves asparagus production, and one on the cultivation of milk fish uses green LEDs to enable the fish to better see their food at night, so that they eat more and grow larger without being fed growth hormones. In addition, a particularly promising application is the production of herbs for Traditional Chinese Medicine (TCM). “The LEDs help us to enhance the good elements in the TCM herbs and suppress the bad ones,” says Chu. “They are also successfully used in the herbs’ drying process, making storage easier and better.”

Chu says the key to success in the plant-factory equipment business is system integration. Accordingly, he notes, it may not be the actual LED maker who will make the most money in the looming era of plant factories, but rather future joint ventures among LED makers, farmers and R&D institutes that create new business models and export the resulting products.

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