LED Investment to Recover in Light of Solid State Lighting (SSL) Adoption
By Clark Tseng, SEMI Industry Research & Statistics Group
During the LED conferences last month in Taiwan (LED Taiwan 2014) and in China (LED China Conference 2014), industry participants were optimistic about the LED market outlook in light of rising LED penetration in the general lighting market.
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One of the early indicators is that LED chip makers and packaging houses from Taiwan are posting much stronger revenue growth in the first quarter of 2014 compared to the same period last year. While the LED industry is eyeing soaring growth of lighting market, the “legacy” LCD panel backlight markets actually perform admirably. For smartphone and tablet LCD panels, LED demand is driven by growing screen size, higher resolution, and better color reproduction. In terms of TV backlight, even though LED backlight penetration has nearly reached 100 percent, the growth will still come from growing average TV screen size and the rise of Ultra HD 4K TV that will consume more LED chips.
The LED illuminate market is now in the fast growth stage of product life cycle. Some forecasts are predicting LED lighting adoption to grow over 50 percent each year over the next three years. Currently, the largest LED lighting market is retrofit lamp. Various vendors are aggressively pushing 40W/60W equivalent LED bulbs to the market. With the ban of incandescent bulbs and the rise of environmental awareness, consumers are more willing to choose LED over other alternatives. Besides retrofit, other major lighting markets, i.e. outdoor, retail & hospitality, are expected to drive further growth in the years to come. Both Government advocacy and consumers’ adoption will be the locomotive of the LED market growth.
From the LED manufacturers’ point of view, the competition has now swung from lumen/watt to lumen/dollar. Cost reduction has become the number one priority to fight off price erosion and also to drive market demand. Migration to larger substrate size is one of those approaches to reduce chip cost. Though leading LED chip makers are in mass production on 4” and 6” substrates, the industry is now moving towards 6” and 8” GaN on Silicon production. The investment and trial production of GaN-on-Si LED is occurring all over the world with companies in Japan, Korea and China the most aggressive in pursuing this technology. Other cost reduction efforts can be found on epitaxy and substrate processes and in packaging i.e. wafer-level packaging (WLP) LED, flip-chip LED, and other technologies.
In terms of epitaxy/chip investment, SEMI’s data shows investment level to stabilize in 2014 after two years of recession. China is the region showing the strongest new investment and capacity additions (driven by leading chip makers from both Taiwan and China). MOCVD is still the key cost factor of the epitaxy process, but other equipment categories such as lithography, etch, test, and inspection are gaining momentum as far as optimizing productivity to lower costs. The LED investment is unlikely to return to the level of 2010/2011 spending, but improvement is expected in 2015 with the rising adoption of SSL.
April 1, 2014