His Bright Idea:Dominate Energy-Saving Light Bulbs
How many light-bulb makers does it take to change four billion U.S. sockets to compact-fluorescent lights? Ellis Yan says it takes just one: TCP Inc., the largest manufacturer of the energy-efficient bulbs sold in the U.S. -- and, not coincidentally, the company Mr. Yan owns.
The China-born Mr. Yan, who moved to the U.S. in 1979, has four factories in and around Shanghai that produce more than one million compact-fluorescent bulbs a day. Most are shipped to the U.S. and sold under private labels by Home Depot Inc., Wal-Mart Stores Inc. and other retailers. General Electric Co. and Siemens AG's Osram Sylvania also resell TCP fluorescent bulbs under their names, along with manufacturing their own.
TCP is well-positioned as consumers seek alternatives to traditional incandescent bulbs. Helping to fuel the demand are governments world-wide; in the U.S., the energy bill President Bush signed into law last week will require lighting to use as much as 30% less energy, which will phase out the traditional energy-eating incandescent light bulb. Compact fluorescents use 75% less energy than incandescent bulbs and are considered the likely initial replacement for most home uses.
That has sales of compact fluorescents, known as CFLs, soaring. About 200 million CFLs were sold in the U.S. in 2006, up about 50% from the prior year. Incandescent-bulb sales fell 10% last year to about 1.5 billion bulbs, according to the National Electrical Manufacturers Association. Mike Deneen, a senior analyst with market researcher Freedonia Group Inc., Cleveland, predicts wholesale sales of CFLs will jump to $1.55 billion in 2011 from $415 million in 2006. By 2016, Mr. Deneen says, incandescent bulbs 'will be like the eight-track' tape.
Mr. Yan says TCP makes 70% of the CFLs sold in the U.S. Market-share figures aren't available, but rivals concede that TCP is the largest maker of CFLs sold in the U.S., accounting for half or more of the market. GE is the biggest brand-name supplier in the U.S.
The 53-year-old Mr. Yan grew up in Shanghai. As a teenager, he was sent to work on a farm during the Cultural Revolution. He moved to Cleveland in 1979 to live with an aunt and worked as a computer consultant after graduating from college.
In 1986, Mr. Yan started a lighting business here, selling halogen bulbs. He later opened a factory in Shanghai, in a partnership with a local government agency. He enlisted his older brother, Solomon, to run the factory; Solomon Yan now oversees all of TCP's China factories and owns a minority stake in them. Mr. Yan has since bought out his other partners.
When halogen prices dropped amid fierce competition in the early 1990s, Mr. Yan switched to making compact-fluorescent bulbs, a market largely ignored by bigger manufacturers. His first CFLs were circular or U-shaped and required a special fixture. His biggest customers were hotels, assisted-living centers and other commercial outlets.
In 1994, Mr. Yan heard about a factory in Shanghai making spiral-shaped bulbs. He recruited some of the workers to start making spiral bulbs for TCP. Not long after, he brought his new bulb to a big U.S. trade show and displayed it on a folding table. 'We tried really hard to push the spiral lamp,' he says.
Ed Hammer, who invented the spiral shape at GE in the 1970s, says Mr. Yan quickly understood that the spiral bulbs would emit more light than linear bulbs. 'He was the first one to do that,' says Mr. Hammer, who now consults with TCP.
Mr. Yan's big break came in 2000 when he was among dozens of prospective suppliers invited to demonstrate products to Home Depot at a baseball stadium in St. Petersburg, Fla. A year later, Home Depot was TCP's largest customer.
CFLs got another boost in 2001, when electricity shortages in California and neighboring states prompted utilities to subsidize the bulbs to reduce electricity demand. CFLs at the time cost roughly $11 each, 20 times the cost of incandescent bulbs.
Today, individual CFLs sell for about half that much. They also last longer than traditional incandescent bulbs and use less energy, making them cheaper in the long run. The bulbs also work better than earlier fluorescents, reaching full brightness quickly without a flicker. CFLs now come in many shapes, sizes and colors that can be used in fixtures such as ceiling fans and chandeliers.
One big drawback: CFLs contain mercury, a toxin and environmental hazard. Inside a fluorescent bulb, a tiny amount of mercury is heated until it turns into a gas that reacts with other gases to produce light. CFLs typically have about five milligrams of mercury; Mr. Yan says some of his smaller bulbs have fewer than two milligrams. He and other makers are working to reduce the amount of mercury. Because of the mercury, fluorescent bulbs are supposed to be recycled, rather than dumped in the trash.
As CFL prices fell and concern about climate change rose, TCP's sales grew, to an estimated $300 million this year from $22 million in 2000. Next year, Mr. Yan projects revenue of $400 million.
One possible drag on TCP's continued growth: The surge in sales is drawing more competition. GE, which introduced fluorescent bulbs in 1938; Sylvania; and others are building up their capacity. GE owns a minority stake in Topstar, a Chinese-government-owned fluorescent manufacturer. Other new manufacturers are popping up in Asia. Bulbs incorporating another energy-saving technology, light-emitting diodes, are projected to reach the home market in as soon as five years.
Mr. Yan, a marathon runner, is involved in every aspect of his business. When managers at the Bellagio hotel in Las Vegas weren't satisfied with the color of TCP's lights for hotel hallways, Mr. Yan shuttled between the hotel and his China factories to develop a soft-white light, now called the 'LV color,' for Las Vegas. 'He's very passionate about the business, he's passionate about making a difference,' says Joe Colant, TCP president.
Marriott International Inc. tested TCP's bulbs against rivals before choosing them in 2000 to use exclusively in guest rooms at more than 700 hotels. Lenny Jachimowicz, vice president of engineering for Marriott's North America lodging, says Mr. Yan and TCP work closely with hotel designers to develop new sizes and colors of bulbs as rooms are renovated. When a bulb burns out before its projected 10,000-hour life, TCP replaces it.
'Ellis's approach is 'Tell us what you need, and I'll go back and make it for you,'' says Mr. Jachimowicz. 'He has managed to find a niche in a market that was controlled by' bigger competitors.
Mr. Yan has enlisted several former GE engineers, including Joe Marella, who runs TCP's testing lab. Mr. Hammer, a 45-year GE veteran who retired in 2001, now works with Mr. Yan to try to reduce the amount of mercury used in the bulbs.
Mr. Yan is constantly adding factories and employees in China. Today, he employs about 3,000 'benders,' who spend three months learning how to hand-shape the glass into spirals. They sit in rows, taking hot glass into their gloved hands and spinning it around a cylinder. Mr. Yan is starting to automate the process and expects benders will eventually be phased out. To guarantee supply, he bought a glass factory.
Some bulb makers worry about keeping up with demand for fluorescents if incandescents are phased out quickly. Mr. Yan isn't concerned. At his distribution center in Aurora, one wall is temporary to allow for expansion. 'Capacity is not an issue,' he says. 'I don't need anybody else. I can do the whole thing by myself.'
要几家电灯泡生产商才能满足美国40亿个电灯插座全部改成节能萤光灯的需求？严兆强(Ellis Yan)说只要TCP Inc.一家就足够了。TCP生产的节能灯泡在美国的市场份额排名第一，它也是严兆强自己的公司，这当然不是巧合。
严兆强生于中国，1979年赴美，他在上海周边有四家工厂，每天生产100多万只灯泡。其中大多被运往美国，在家得宝(Home Depot Inc.)、沃尔玛连锁公司(Wal-Mart Stores Inc.)等零售商的店铺里作为自营品牌销售。通用电气公司(General Electric Co.)和西门子公司(Siemens AG)旗下的欧司朗(Osram Sylvania)除了自行生产灯泡之外也会将TCP的萤光灯泡贴牌销售。
这令节能萤光灯（被称为CFL）的销量突飞猛进。2006年美国的CFL销量达2亿只，比上年增长了50%。据美国电气制造商协会(National Electrical Manufacturers Association)统计，2006年白炽灯泡的销量为15亿只，下降了10%。克利夫兰市场研究公司Freedonia Group Inc.的资深分析师麦克•迪尼恩(Mike Deneen)预计，2011年CFL的批发销售额将从2006年的4.15亿美元跃升至15.5亿美元，而到2016年，白炽灯泡会像八轨磁带一样成为绝响。
2000年，万豪国际集团(Marriott International Inc.)试用了TCP和竞争对手的灯泡后选择了TCP，专用于其700多家酒店的客房。万豪北美工程部副总裁Lenny Jachimowicz说，在对房间进行重新装修时，严兆强和TCP与酒店密切合作，开发新的灯泡尺寸和颜色。如果某个灯泡还没达到预计的10,000小时寿命就坏掉了，TCP会负责更换。