China LED Fab Industry: What Will Determine Success?
By Daniel QI, senior analyst and LED project manager, SEMI China
China LED Fabs Quantity Begin Negative Growth
After 2014, China will boast the world's largest LED epitaxy and chip production capacity base. However, China LED fabs are mainly concentrated on blue/green GaN LED manufacturing, and most of the capacity focuses on small and medium size chip products in terms of technical and process capability. The fierce price war in this market has led to low profit levels for many companies, and even the closure of a number of domestic LED chip manufacturers. Consequently, many domestic LED fabs are in a weak position, even though in general the LED lighting market has great potential.
Some LED fabs in China which lack productivity and core technology competitiveness will gradually be phased out due to the fiercely competitive market. According to SEMI statistics, the China LED fab industry experienced a rapid increase in past years and — had a total of 76 LED epitaxy and chip fabs (excluding companies that declared projects without actual installation progress) at the end of 2011.
However, starting in 2012, the number of China fabs could decline. Manufacturers will exit primarily from the results of financial losses and conflict between the investors and the management/technical teams. At present, we observe that a few LED Fabs may exit due to the above reasons as early as the end of this year. Based on our estimation, 30 to 40 percent of China LED fabs will suspend operations or be acquired by 2015, while only a few of them will dominate in various segments. Only companies boasting the advantages of scale productivity and patented core technology as well as a progressive mindset will be successful.
The Downturn of New MOCVD Market
The new MOCVD tool market in China grew rapidly and reached a peak in 2011, when China MOCVD installation ranked as the first in the world and occupied more than a half of the total quantity shipped in the world. However, tool installation and utilization were low at some manufacturers, in the worst cases, some “new comers” had utilization at only 20 percent. Future demand was seriously overdrawn during this pre-phase MOCVD installation boom, and the MOCVD market in China is expected to be at a low level over the next three years. In _2012, China's new MOCVD installation is expected to be about 40 percent of the 2011 level.
In addition, it is possible with the closure of some LED fabs over the next few years, a potential secondary MOCVD equipment market could emerge that will bring some pressure on the new MOCVD installation market.
Another trend growing in China fabs involves the wide use of Patterned Sapphire Substrate (PSS) in GaN epitaxial processing. Based on SEMI China statistics, overall PSS penetration in China’s LED epitaxial Fabs is close to 80 percent (for more detail, please refer to “Report on Material Market of China LED manufacturing Industry 2012" available in October from SEMI). PSS can effectively improve the brightness of LEDs, but it’s not the only way. Some domestic enterprises in China have selected a "shortcut." PSS is a patented technology, but many companies see little choice but to use it. A considerable number of manufacturers manufacture smaller chips for some specific applications due to the price pressure so as to increase the output of single epitaxial wafer, and PSS helps to compensate for loss of brightness brought about by size reduction.
SEMI China LED Manufacturing Industry Platform
SEMI China has set up a platform to promote the upgrading of China’s LED manufacturing industry The only LED-manufacturing themed exhibition is at SEMICON China — the LED Manufacturing Pavilion. SEMI is committed to providing new ideas to improve LED manufacturing processes and equipment and helping to promote the integration of the latest technology across the LED manufacturing industry chain. This SEMI event provides a one-stop display platform for LED manufacturing technology solutions and also establishes a series of industrial exchange platforms, such as the SEMI China LED Commission, and the LED Technology Conference.
In addition, SEMI China will hold "2012 China LED Manufacturing Technology Conference”, co-organized with Swagelok, in Pudong Kerry Hotel Shanghai on October 19, 2012. Top technical and marketing executives from the global LED industry will give in-depth analysis on the latest trends of the LED manufacturing technology, including technology trends of the new generation of MOCVD technology and the current status on localization of MOCVD tools in China. These key precursor delivery systems play a critical role in process yield, repeatability and cost control, and require temperature, pressure and flow controls beyond the capability of traditional gas system designs. Also, the conference will cover the latest achievements of GaN-on-silicon LED, LED device manufacturing technology, and Environment, Health and Safety (EHS) issues.
Speakers include representatives from Swagelok Company, who will share its observations and experience in designing and implementing advanced delivery system through collaboration with the industry and AZZURRO which will show its latest progress on GaN-on-Si technology. In addition, speakers from MOCVD supplier AIXTRON, material supplier Nata, and LED fab InvenLux etc. will also present.
For more information, please visit www.semi.org.cn/led
September 4, 2012