Interview With Lumileds CEO – Pierre-Yves Lesaicherre

After an intensive 4 month handover period from former CEO Mike Holt, Pierre-Yves Lesaicherre took the reins of Lumileds in time to meet many customers at Lightfair in May. Taking time out of his busy schedule, Lesaicherre talked to Lighting.com Editor Julie Allen about how to accelerate LED adoption and his thoughts on what happens next at the LED giant.

Allen: The market penetration of LEDs is still rather low. How are you going to drive down costs to get faster adoption of LEDs – especially at the consumer level?

Lesaicherre: Driving down costs comes from three major activities. The first one is economies of scale. In the semiconductor industry generally, every time you double the volume, at a given capacity, you get 20% cost reduction, purely from economies of scale. The second thing we are doing is a very strong effort in component cost reduction: here we are talking about materials, looking at our suppliers, maybe changing technology – so a very strong cost reduction program that we started at the end of last year. Thirdly, another way to look at costs, and to me this is the most important element – do you look at costs at the component level or do you look at system costs? If you are trying to replace a 50 cent component with a 30 cent component it’s going to be a challenge going forward because you are quickly going to reach the limits of your cost reduction. But if you’re going to change from buying five components at 1 dollar to three components at 80 cents by having a different design, then you can really get somewhere. So system level cost can be taken out and also, there’s still technology consolidation that we can do; either on the product or on the packaging, that will take the cost out.

What we are not going to do is have a cost-down, cheap, low performance product and a more expensive, high performance one – I don’t believe in that. I think your innovation should take your product and system costs into consideration right from the start. That’s the direction we’re going in the company.  We will have cost innovation. Very often I have seen product roadmaps with innovation – and I say, where’s the cost there? No, no, – cost has to be part of your thinking when you are designing new products. So cost is going to be an integral part of what we do. We have short-term cost reduction programs, as I said. We are going to ramp up capacity with more volume and we are going to get cost benefits and economies of scale. But really innovation at the product and at the system level is the medium to long term key direction that we need to follow. And the benefits will get transferred to our customers.

That’s a long answer to a short question…

Allen: A number of companies including Lumileds have recently introduced mid-power LEDs. What are the main applications for the mid-power range that you have launched?

Lesaicherre: Historically, mid-power was not for the lighting market but the display segment – it was made for TV and PC monitors. Now, what happened; which is quite interesting in the industry, is that the massive capacity that was put in place allowed very low price points and also the overcapacity meant that mid-power players had to look for other outlets for their products. So they started going towards illumination. Early on I think no one had considered mid-power as a valid product for illumination. However, the fact that it is very cheap and has enormous capacity and has seen enormous improvement in terms of the performance – the lumens per watt and the lumens per dollar – has made it a very strong competitor to high-power in certain lighting applications. The lighting applications where we see mid-power making strong inroads are the non-directional lighting applications – typically indoor such as troffers for offices, lower wattage incandescent replacements etc.

We don’t think that limiting ourselves to high-power is the right strategy going forward because there will be a part of the lighting market that will definitely be mid-power. There’s a big part of the lighting market that’s definitely high-power – directional, outdoor, spots, etc. But there’s going to be a middle ground where one or the other could work. Some customers will want light quality, some will want a cheaper solution. Our intention is to offer a palette of options and let them decide if a high-power or a mid-power product is the solution they want. We are not going to decide for our customer.

We took longer to introduce mid-power products because we wanted to make sure that they are more reliable than most of the products on the market. The reality is that a lot of products released to the lighting market by our competitors were at a lower standard than customers were used to with high-power, in terms of product quality, yellowing, lumen maintenance over time and color maintenance. A lot of that is due to the phosphor and our intention is, as we go into mid-power, that we are going to apply the same knowledge as we have in our high-power phosphor.  We will only release products that have the same reliability as our high-power products. Mid-power is clearly part of our strategy.

Allen: There’s a lot of buzz going on at the moment about the ‘DC in buildings’ issue where we can vastly reduce the load and save a lot of energy if the buildings are all DC driven, which of course is great news for LEDs. What are your thoughts about that?

Lesaicherre: OK. Let’s talk about what we’re doing today with AC. Because today most of the LEDs we have and our competitors have are 3 volts and most of what’s coming out of the wall is 100, 120, 220 etc. So at the moment you always need a converter to do a down conversion to 3 volt. This year we introduced Luxeon H which is a 50 volt product. By putting 2 or 4 in series you can directly drive these products. You don’t need a driver; you just need a small voltage stabilizer. We are already introducing these products with very small form factor. For example, with a GU10 you have no room to put a driver in there. So these products have a lot of interest. So going to DC is only going to help us.

Allen: You’ve had a very good hand-over period with Mike who is well known in the industry as a true professional. What was that like for you?

Lesaicherre: It worked extremely well. We went to every major customer in North America, Europe, China and Japan and we met the CEOs. And we did a handover with each one of them. Mike said a few words; he introduced me, it was all very positive. I tell you, our customers were wowed – this is unheard of. Mostly in the U.S. the previous CEO gets fired or he leaves slamming the door. It’s very rare that the previous CEO is there to introduce the next CEO and say ‘you’re in good hands’. Also, it was very good for me because I got four months with Mike travelling around the world. I could pick his brains, get to know the customers and get educated into lighting. It was a rapid education that very few people can hope for. It’s been a really exciting period. And as you see, I’m ramped up on a lot of topics even though I haven’t come from the lighting industry.

Allen: Yes, clearly you have absorbed a lot given the relatively short time you’ve been on board. But now that Mike is gone, will you be making any big changes in the short term?

Lesaicherre: It depends what you mean by ‘big changes’. Everybody has their own ideas of that. I think some of the bigger changes required for Lumileds to become a lot stronger were already in place when I came along. So I’m just going to either accentuate or accelerate some of these. I think that becoming even more customer-centric and application-centric is something that we have already talked about. Being more outward looking, partnering better with customers, defining products as we work with customers, and really finding innovation in partnership with our customers. But then as we develop this product downstream, we need to push better value propositions. Talking at the systems level rather than talking at the components level. A lot of our messaging downstream is going to follow what we do upstream, which is partner better with our customers. That is one thing we are doing.

Driving down the costs is also something that began last year. But this cost mentality has to be absolutely engrained into every part of the organization. Coupled with that, we are accelerating our rate of product introduction. We had 33 product introductions last year. We will have 140 this year – a massive increase in product introduction. This year we will have more Capex and more R&D than we have ever done before. And of course, with the introduction of such great products, we need to have a broader reach of our technology to a broader base of customers.

So in a nutshell, we want to reach more customers. And the way we want to work with our customers and the way we communicate to the industry to be solution/system/benefits oriented, rather than components. And we want to be not just a leader in technical innovation; we want to lead the way in cost-conscious innovation too.

Written by Julie Allen
This interview was originally published June 2012 on Lighting.com and is reprinted with their kind permission.

29 Aug