The LED industry has now gained enough momentum and reached a critical mass to entice equipment and material providers into developing dedicated solutions for LED manufacturing.

The recently released Yole Développement report, LED Packaging 2011, predicts more than $2 billion will be invested over the 2011-2016 period in new equipment for LED packaging.

Packaging typically accounts for 20% to 60% of the packaged LED total cost and therefore represents the single largest opportunity for cost reduction, according to Yole Développement.

Today LED packaging is still done using mostly retrofitted equipment from the IC industry and relying on existing technology solutions and materials to improve LED cost of ownership and performance, according to the report.

While this has allowed LED manufacturers to benefit from decades of research and development and investments in the IC industry, it also constrains the industry into the space defined by existing technology platforms that are not optimized for the specific needs of LEDs.

Dedicated solutions are emerging from existing and new players that will allow significant reduction in LED manufacturing cost through improved yields, throughputs and material efficiency, according to the comprehensive report.

With the general lighting market forecasted to reach $20 billion by 2020 an investment cycle initiated in Korea is now essentially fueled by subsidies and other incentives in China, as the country is aggressively trying to position itself as a future leader in solid state lighting.

The report includes discussions on major challenges with key LED packaging process steps, and the pros and cons of various technology options.