LEDs market analysis
Figure 2: The $1.5 million subsidy offered by the Chinese government for the purchase of multi-wafer MOCVD reactors has helped this
country become the biggest market for shipments of this deposition tool
to hit its guidance in recent quarters and has seen its profits plummet. In 2010 it exported a significant proportion of its high-power chips to China, which is probably the biggest market today for solid-state lighting, due to the street lighting program. Repeating this feat at the same margins is now is far harder, due to downward price pressures on the LEDs.
Young believes that excessive MOCVD reactor installments in 2011 along with yield improvements can help cater for demand to 2014. “We think that yield improvements are going to be significant over the next two-to three years. If everyone increases their yields by 20 or 30 percent, that’s [equivalent to] a whole lot of new tools.”
Further efficiency gains may result from an increase in substrate sizes. Currently, production is predominantly on 2-inch wafers – it is one consequence of the subsidy plan, which required the purchase of a tool capable of handling at least 31 2-inch wafers. If process engineers can learn to handle the strain associated with the growth of nitride films on sapphire, production can then move to larger wafer sizes, yielding more chips from every reactor.
Although there will be overcapacity in the market for the next few years, that does not mean that MOCVD sales will dry up. “Certain tools may become less functional,” explains Young, “and new tools may be brought on the market that are more cost effective.” In addition, some companies will also invest in capital equipment to win market share. The path that China’s LED industry will take over the next few years will be influenced by
the twelfth five-year plan, which will be unveiled in a few months. The nation’s leaders want their country to be one of the three third biggest LED manufacturers by 2015, so this technology is sure to feature heavily in the next programme.
Young predicts that the next plan will focus on increasing domestic demand for LEDs, and place less emphasis on chip supply. He speculates that this could involve domestic content requirements, which insist that LEDs used in goods are made in China.
“So companies like Cree, which isn’t manufacturing the chips in China – although they do package them there – could face some hardship.”
Along with greater domestic demand, the Chinese government will want its LED industry to develop more of its own intellectual property, and echo the advances that the nation’s solar industry has made over the last few years.
“China was behind in solar, but after they partnered with Australian universities – New South Wales in particularly – they quickly improved the technology and were on the leading edge very quickly,” says Young. “These things haven’t happened yet in LEDs, but I’m sure it’s a goal. And they are going to spend a lot of money trying to make it happen.”
IMS publishes quarterly market reports on the Chinese LED market
© 2011 Angel Business Communications. Permission required.
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