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Trends in upstream LED industry

Posted: 13 Jul 2012 ?? ?Print Version ?Bookmark and Share

Keywords:LED industry? supply chain? MOCVD? rare earth? sapphire ingots?

According to the Digitimes Special Report, the LED lighting supply chain can be divided into rare earth, MOCVD equipment, sapphire ingots and substrates, LED chips, LED packaging and LED lighting fixtures. The report centers on the upstream segments including rare earth elements for producing phosphor powder material, MOCVD equipment (for manufacturing LED wafers), sapphire ingots and substrates that according to the company serve as indicators for future developments the industry.

Rare Earth
China's rare earth outputs account for more than 90 percent of total rare earth supplies in the world. This year, the government continues to implement measures to limit the exports of rare earths, causing the price of rare earths to increase significantly.

Rare earth is the main ingredient for phosphor powder, an important material for both fluorescent and LED lightings. The difference is that fluorescent lights use large amounts of phosphor powder compared to LED lighting. Therefore, as the price of rare earth increases, the cost of producing fluorescent lighting products increases as well. Comparatively, LED lighting only uses a small amount of phosphorus powder and has only been slightly affected by the price increase of rare earths.

After booming demand for MOCVD equipment in 2010-2011, the order visibility this year has been shorter because most LED chipmakers have enough capacity to meet demand. Therefore, Digitimes Research predicts global demand for MOCVD equipment in 2012 will be 275 units, a 60 percent decrease from 690 units last year.

China continues to dominate demand for MOCVD equipment this year because some shipments of MOCVD equipment have been delayed to 2012 and some local governments have continued to provide subsidies for procuring MOCVD equipment. Hence, demand from China in 2012 is to account for 68 percent of global demand.

Digitimes Research predicts U.S.-based equipment provider Veeco and Germany-based Aixtron will continue to dominate the market this year. The combined market share of the two firms in 2012 is expected to reach above 95 percent and in particular, Veeco's global market share is to reach 60 percent.

Sapphire ingots and substrates are important upstream materials for LED firms. Currently, most firms use LED epitaxial wafers made from sapphire substrates. Only a few firms adopt silicon (Si) or silicon carbide (SiC) substrates. Hence the price trend and market balance of sapphire substrates are also important indicators for the development of the LED industry.

For 2in sapphire substrates, the price stabilized in 1H12 at $8-9/unit. The price is expected to remain steady in 2H12 because the current price is close to production costs and has no room for decreases even if there is an oversupply condition of sapphire ingots. However, patterned sapphire substrates (PSS) can help to increase the brightness of LED products effectively, hence the price of the product is likely to show a slight increase in 2H12.

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