LEDs are an old technology, why did the industries take so long to put them into light bulbs? Was there any technological gap missing?
It is not possible to produce white light without an efficient blue LED, either using RGB LEDs or a blue LED + yellow phosphor.
The breakthrough was the invention of the high-brightness Gallium-Nitride blue LED by Shuji Nakamura at Nichia in the early 1990s.
It still took a while to get the overall efficiency up to the level of fluorescent bulbs, and it's only in the last decade that LEDs finally came out on top.
It took a long time to produce LEDs that had a reasonable "colour temperature" (shade of white), and suitably high efficiency. The normal operating principle of LEDs produces only a single band of light, like a laser. So the white ones are made of a blue or UV LED and a phosphor re-emitter.
For easy replacement of conventional light fittings, LED bulbs also need a small, cheap, constant-current AC-DC converter. This is usually some kind of switchmode power supply. These too have only really become cheap and widely availble in the past decade.
See also the L-Prize.
The majority of the answers thus far have focused on the technical challenge of replicating white light with LEDs, with development of the blue LED being the major breakthrough on that front. Some mention has been made of the difficulty of developing blue LEDs with sufficient efficiency to make a practical lamp. While this may be obvious to practicing EE's, I think it's worth elaborating in more detail why too low an efficiency represented such a hindrance to commercialization: namely, plain old heat.
An often-quoted advantage of LEDs is that they don’t produce heat, and are cool to the touch. Fact or fiction?
In one sense this is true: LEDs are cool to the touch because they generally don't produce heat in the form of infrared (IR) radiation (unless of course they are IR LEDs). IR radiation heats the enclosures and surroundings of incandescent bulbs and other sources, making them hot to the touch. The absence of IR radiation allows LED fixtures to be positioned in locations where heating from conventional sources would cause a particular problem e.g. illuminating food or textiles.
However, crucially, heat is produced within the LED device itself, due to the inefficiency of the semiconductor processes that generate light. The wall-plug efficiency (optical power out divided by electrical power in) of LED packages is typically in the region of 5-40%, meaning that somewhere between 60 and 95% of the input power is lost as heat.
The energy consumed by a 100-watt GLS incandescent bulb produces around 12% heat, 83% IR and only 5% visible light. In contrast, a typical LED might produce 15% visible light and 85% heat. Especially with high-power LEDs, it is essential to remove this heat through efficient thermal management. Without good heat sinking, the internal (junction) temperature of the LED rises, and this causes the LED characteristics to change.
Most significantly, the junction temperature affects the lifetime of the LED. Unlike other light sources, LEDs don’t tend to fail catastrophically (although a small number do, especially if you cook them); instead, the output of the LED decreases over time.
— T. Whitaker. "Fact or Fiction – LEDs don’t produce heat". LEDs Magazine, May 2005. http://www.ledsmagazine.com/articles/2005/05/fact-or-fiction-leds-don-t-produce-heat.html
A Google Images search for "led bulb heat sink" turns up a veritable zoo of heatsink designs:
I suspect that there was some lag in market penetration due to the striking difference of form factor required for thermal management.
Another minor, non-technical, aspect that contributed to a few year delay was the patent issues related to blue LED production.
Nichia, where Nakamura worked, had many key GaN (Gallium Nitride) patents, but not all. Others, such as Cree (SiC patents) and Toyoda Gosei (other LED patents) had other key patents necessary to produce blue LEDs in high volume.
The technical issues were generally figured out by the late 1990s, but the big LED players were not producing any quantity of blue LEDs (partly, mostly?) because of patent litigation issues.
By late 2002, a few key patent cross-licesning agreements were completed and within 1-2 years there was a huge increase in the volume of blue LEDs being produced.
Cree and Nichia Announce Patent Cross License Agreement and Settlement of Litigation http://www.nichia.co.jp/en/about_nichia/2002/2002_111301.html
Nichia and Toyoda Gosei settle LED dispute http://www.eetimes.com/document.asp?doc_id=1178214
This is a question of economics and public inertia. Legacy technology is cheaper to produced due to long term investments in infrastructure and mass production. New technology has to go through funding issues, initial investments, infrastructure building, marketing, slow early adopter stages, distribution deals, etc. If it wasn't for legislation in the US forcing a way for new tech, most would still be on incandescent instead of the current mix of incandescent, CFL, led. It's not a natural capitalistic invisible hand of the free market forces, but a forced adoption.
The benefits of leds comes second to most people, who are lethargic in technology adoption, especially in the face of higher initial costs.. Most people balk at a 20 dollar led bulb compared to a 3 for $3 incandescent, even if the led bulb will outlast 20 incandescent bulbs at half the operating cost. It's only now that individual led bulbs are down to the 5~10 dollar range that people are really moving towards it.
The problem was to create natural white light. Normal daylight has a spectrum of frequencies in it, but leds can only produce on certain wavelengths. So the engineers had invent different materials to produce different wavelengths. then different leds are mixed together so the resulting light is pretty much natural white.
First, around 40 years ago, they invented the red LED. Then came progressively blue/green/other colors following different technologies evolutions. Also, the first diodes were not very powerful.
So, the issue was to make white light emitting diodes, and to make them powerful enough to be competitive against lightbulbs, which happenned only less than 10 years ago. And white diodes are still very expensive, but the cost is largely compensated by their durability. Try to look up for the price of a single Audi/BMW/whatever full-led headlight and you'll understand.
Every application of lighting has its own demands, and usually those have been solved for more than a hundred years. New solutions are rarely superior in both quality and cost from the beginning. Another not yet mentioned example is the CRI (Colour Rendering Index).
While incandescent bulbs have a spectral response that is similar to a blackbody (hence we have the colour temperature system), white LED lighting does not.
Even those with marketed "ultra high CRI" of almost 100 like in the image above (some google image search hit) do produce only superficially similar light output as incandescent bulbs or the sun.
For a lot of applications this is fine, but especially the difficulties of rendering skin colour makes it unsuitable not only for a lot of media applications but also makes people in your living room somewhat look sick.
Also quite some other areas have a need for proper colour rendering, like people selling stuff where colour is important.
This all might be a small part, but all the other answers mentioned other points that might be small on their own too, but in total give the market enough inertia as if there hasn't been all those little problems in the beginning.
Take tomorrows technology with cheap tiny SMPS and 99CRI white LEDs back to 1997 and everyone will almost instantly switch to that technology.
They also had to get the correct voltage and amperage going through the LED's to make them last almost forever and get the brightest white on the white LED's where it didn't matter quite as much on red, green, etc LED's. Incandescent bulbs may cost pennies to make but since the Spiral Compact Fluorescent Light Bulbs came out that was supposed to last for years but by no means do not, incandescent bulbs are fewer where you buy them and have went up quite a bit in price and since they use lower voltage, I see CFL bulbs getting cheaper and cheaper built not to last as long as they do now and incandescent bulbs getting higher.