In this paper, we start from the study on the packaging efficiency of the phosphor-converted white LED via a new way to measure and calculate the blue light from the blue die to the encapsulation lens. Then we try to estimate the limit of luminous efficacy of a pcW-LED with Type VII structure. In the calculation, with the EQE of 81% of the blue die and Stokes loss, we obtain the optimal limit of luminous efficacy. The largest one reaches 300 lm/W, and occurs for green-white light with CCT from 4000K to 5000K. More practical limit is calculated in considering phosphor quantum loss and geometry loss, and the practical limit of luminous for CRI around 60 is around 210 lm/W, and for CRI larger than 80 is around 175 lm/W. Luminous efficacy will be sacrificed to obtain higher CRI. In order to know the real optical flux on the illuminated target, we introduce the optical utilization factor (OUF). Three application cases are discussed. The OUFs for light bulb, automotive head lamp, and street light are 90%, 60% and 45%, respectively. In considering human factors, it is interesting to find that a light source with lower luminous efficacy can perform higher illumination luminous efficacy (ILE). Therefore it is important to use ILE rather than LE when a light source is practically applied to lighting.