Growth in HB-LED Market Drives 3X Capacity Boost-- and Possible Sapphire Shortage

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Growth in HB-LED Market Drives 3X Capacity Boost— and Possible Sapphire Shortage

By Paula Doe, SEMI MEMS & Emerging Markets

Cree XLamp LEDs, cool white to warm white (Source: Cree)

The high-brightness LED (HB-LED) market will see greater than 50 percent growth this year, to reach $8.2 billion in revenues, according to the latest Strategies Unlimited forecast. A major ramp-up in LED adoption for backlights for LCD TVs and monitors is driving this growth, which should continue to average 30.6 percent (%) a year through 2014, creating a $20.2 billion opportunity for the packaged semiconductor devices. “This is the biggest market we’ve ever forecast, and I get a little nervous doing it,” said Robert Steele, director of optoelectronics programs, at the recent Strategies in Light event in Santa Clara, Calif. “But if you add up the numbers, it’s inescapable.”

While backlights are the main driver, the second growth area is LEDs for general illumination, where device sales jumped 24% in 2009, to _$650 million. Steele expects that to pick up to 32% growth this year, accelerating to 44% average annual growth through the next five years. Though the LED bulbs and lamps are still expensive and highly variable in quality, there’s been major recent progress, and the energy efficient LEDs are increasingly finding their way into lighting applications where they offer desirable function as well as savings in cost of ownership.

More than 500 companies around the world are offering luminaires or replacement bulbs, plus an uncountable number in China. Major companies like Wal-Mart and Starbucks are starting to retrofit their sites with LED lighting. Nor does it hurt that governments around the world are legislating the phase out of the incandescent bulb, and looking at restricting the use of toxic materials as in compact fluorescent bulbs. California starts banning incandescents next year, the rest of the U.S. in 2012.

This jump in demand means 50% unit growth this year and next, requiring a substantial ramp in HB-LED production capacity, says Steele. In fact, this backlight-driven cycle will drive a 3X increase in capacity through 2012 to 2014, and accelerate the transition to 4-inch and then 6-inch wafers as producers scramble after better yields, argues Jed Dorsheimer, principal, senior equity analyst at Canaccord Adams.

The gating factor is likely to be the availability of sapphire substrates, accompanied by a sharp increase in substrate prices. “We originally projected a 50% price increase, but now it looks like there may be an even greater shortage,” says Dorsheimer. “There’s a 33% increase in tool capacity coming on.” Once the TVs and monitors all convert to LEDs, however, all this new capacity will likely results in an oversupply and push down prices, but that will help propel the next wave of demand for general LED lighting.

MOCVD Sales: Second Cycle: Bookings peak 2010, sales peak 2010; Third Cycle: Booking spike beginning in 2015 (Source: Canaccord Adams)

Wider Opportunities for Other Semiconductors in Lighting Systems

What was the key “take away” from the Strategies in Light conference — besides the fact that HB-LED lighting has suddenly exploded into a real volume business over the last couple of years? The discussion has moved on to how else to use all those smart nodes through the building, now that we’ve replaced the vacuum tubes with transistors. While chip makers have long been making the drivers, power supplies and other control electronics needed to run the LED lights, now companies are looking at integrating more electronic intelligence into the lighting system.

Chip makers at the lighting show were showing not just drivers, but wireless radio chips, sensors and MCUs for smart control of lighting systems, both to better reduce energy usage and to control the quality of light for different activities at different times. NEC Electronics America, for example, was showing MCUs that enabled dimming of LEDs with standard commercial dimming switches, and RFICs for wireless networking of streetlights and building lighting systems. “We’re adding intelligence to LEDs for the luminaire makers,” said Bob Pinteric, GM of the multipurpose microcontroller strategic business unit.

And adding digital intelligence to lighting was the defacto theme for the startups pitching at the associated investment forum. Redwood Systems and LUMEnergi each claimed 50 to 70% energy savings on the lighting in commercial buildings with their different approaches which enable more sophisticated automated control of the system, so brightness can be automatically adjusted in response to the amount of daylight coming in, and tuned to the task at hand. Redwood Systems takes advantage of the DC nature of LEDs to connect them with low-cost, low-voltage wiring system. LUMEnergi makes intelligent dimmable ballasts and control systems for a similar smart system, also connecting to the utility to dim lights unnoticeably when power demand is high. General Service Administration buildings in San Francisco are installing pilot systems. mSilica similarly claims better performance with less energy by smarter control of LED backlights with its mixed-signal power management ICs, that do things like regional dimming to enhance contract and reduce power use. Looking a little further out, there was buzz about integrating stereo speakers through the house in the ceiling lights, and about Telelumen’s replication of candle flame and sunsets in a luminaire billed as an iPod for light, to playback recordings of illumination.

The narrow bandwidth and tunable color of LEDs also open the way to new applications. Speakers talked about biomedical uses ranging from clearer endoscopic imaging for detecting gastric cancer to regulating circadian rhythms and slowing the progression of Alzheimers disease. Breaking up the visible spectrum could also provide more bandwidth for communications, like the RF spectrum.

Value Chain Innovations Mean More and Better Light, at Lower Cost

While LED chip makers are making impressive progress on making more efficient devices, with production devices now commonly achieving 150lm/W, there’s plenty of innovation coming from all the rest of the value chain as well to help get light output up and costs down.

One proposal for reducing capital investment in fabs is repurposing of existing semiconductor fabs. Dick Carkner, principal technologist for CH2M Hill, argued that facilities and part of the toolsets from some of the 100 or so idle or underutilized 200mm fabs in the U.S. could probably be acquired for ten cents on the dollar retrofitted for LED manufacture relatively easily, saving about six months of construction time and 30% of total cost. Attendees with excess cleanroom capacity from various electronics sectors were in fact talking to new entrant LED producers at the show. (Carkner also mentioned that CH2M Hill was starting design work for 450 mm fabs.)

Others further downstream may be taking a little of the pressure for better thermal management off the chip package. Several LED light fixture makers are using Nuventix’s active air cooling system, which rapidly moves a electromagnetically driven polymer membrane to pulse jets of air past the LED device and back into the room, reportedly cutting the heat in half to allow what CEO Jim Balthazar claimed was a 90% increase in lumens per dollar.

Other companies claimed big improvements in LED efficiency and big potential cost savings by radical changes or replacements for phosphors, optical materials, heat sinks and drivers. QD Vision said its quantum dots sized to particular band gaps can be coated on the bulb to convert cold white light to a warm incandescent quality light at 50% better efficacy than other warm white lights. Carclo Technical Plastics and BayerMaterials Science reported their new polycarbonate optical materials improved device efficiency by 5%. GrafTech International argued for replacing the heat sinks with its flexible sheets of graphite laid inside the metal lamp casing. And Lynk Labs and Seoul Semiconductor argued for eliminating drivers and power supplies by using AC device topology for some simple plug in devices, though with some loss of brightness.

For more information on HB-LED industry, please visit SEMICON West 2010 Extreme Electronicsand the SEMICON China LED Manufacturing Forumexhibitor webpage. To get involved in a SEMI online LED community, join the SemiNeedle Extreme LED online community. Please contact Deborah Geiger at dgeiger@semi.orgor 408.943.7988 for additional information on SEMI’s involvement in the LED industry.

March 2, 2010