The firm expects the market for LEDs in general lighting applications to expand to $875 million in 2010, from $144 million in 2005, a compound annual growth rate of 52 percent. The growth will hinge on development and availability of high-brightness and ultra-high brightness LEDs.

"For most highest-brightness LEDs, upfront costs are too high and brightness is too low to compete effectively with traditional light sources," said Jagdish Rebello, principal analyst for iSuppli, in a statement. "But companies like Lumileds, Nichia and Osram are continuing to advance the capabilities of high-brightness LEDs, making them more suitable for use in general illumination."

Overall global LED sales are expected to rise 11 percent in 2005 to $5.2 billion, after rising 26 percent in 2004, according to iSuppli.

"New suppliers in Taiwan, China and South Korea have entered the LED manufacturing and packaging supply chain, and they are aggressively eroding average selling prices as they compete for market share," Rebello added. "Furthermore, growth in the single dominant application for high brightness LEDs—the backlighting of liquid crystal displays in mobile phones-- is beginning to slow as shipments of wireless handsets begin to decelerate."