A fully microscopic theory is presented for interacting electrons, holes, photons, and phonons in semiconductor heterostructures. The formation dynamics and statistics of incoherent excitons are analyzed for different densities, lattice temperatures, and photonic environments. Luminescence experiments are shown to depend strongly on the photonic environment in contrast to suggested terahertz absorption measurements. Whereas luminescence in free space is dominated by plasma contributions, terahertz absorption should be able to directly measure excitonic populations.