Lighting companies are within reach of a price point they think will make bright LED light bulbs a mass-market item: $10.

High-quality LED bulbs in the popular 60-watt category will fall to about $10 by the end of this year, a price that will be a “breakthrough” for LED lighting, the CEO Philips Lighting Ed Crawford told me earlier this week.

Yesterday, competitor Cree introduced a 40-watt equivalent priced at under $10, while 60-watt equivalent bulbs cost $12.97 or $13.97. (See, Cree Introduces an LED Bulb Edison Would Love.) The company deliberately chose to have one bulb under $10 because it’s an important threshold for consumer products.

“For pretty much any product sold in a big box retail store, ten dollars is a magic number to get consumers to try them,” says Mike Watson, the vice president of corporate marketing at Cree. “This price point is quite strategic.” 

About 80 percent of the light bulbs sold in the U.S. give off as much light as a 40-watt or 60-watt incandescent light, which is why this product category is so important to lighting companies. A few years ago, a 60-watt equivalent bulb cost $40, but higher production volume and design innovations have allowed manufacturers to continually shave prices down. Philips now sells one for about $15.

There are already LED light bulbs below $10, but they tend to be for dimmer bulbs or lamps that give off light in one direction. By contrast, the lastest LED bulbs give off light in all directions and can be used nearly anywhere, whether it’s for an overhead fixture or desk lamp. Cree’s Watson declined to say whether its 60-watt bulb will cost less than $10 this year but he indicated the company is prepared to lower prices in response to competition. 

Philips is bringing down costs through a combination of process improvements and design changes. For example, it has a more efficient binning process for testing the light of LEDs. It’s also saving money on material by using smaller heat sinks and a patented air circulation system for cooling LED semiconductors, Crawford says.

Meanwhile, the efficiency of LED semiconductors, as measured in lumens per watt, is improving, which means the payback on LED bulbs will also get better. “Those price hurdles mean a lot,” says Crawford. “When you look at the payback versus a halogen or CFL for operating costs, you start to get paybacks well under two years.”

Because of limits to LED semiconductor improvements, Crawford says the price of LEDs will level off in a few years to around $5, which is still more expensive than halogen or compact florescent lights. To help maintain consumer interest, he expects lighting makers to develop LEDs with wireless chips, allowing them to be controlled in new ways. Philips last year introduced Hue, a set of four LEDs that let people control the light color and lighting schedule from a smart phone. (See, Apple Sells Philips Color-Shifting Wireless Lights.)

“The reason LED lighting will revolutionize lighting is not just about the energy savings. It’s because it allows you to generate millions of different colors and effects that you can’t do today,” he says.