Aggressive LED Fab Investment to Drive 40% Growth in Equipment Spending in 2011

Aggressive LED Fab Investment to Drive 40% Growth in Equipment Spending in 2011

By Clark Tseng, SEMI Industry Research and Statistics

With the wide adoption of LED (light-emitting diode) technology in LCD backlight applications, the LED industry has now advanced into the growth stage of its life cycle. To better serve the soaring demand, the industry has attracted a huge amount of capital pouring into the LED supply chain from equipment and materials to LED epitaxy/chip fabrication and LED packaging capacity.

SEMI’s Opto/LED Fab Forecast tracks over 250 Opto/LED fabs activities worldwide, with detail information on fab construction and equipment spending, key milestone dates, capacity and ramp up schedule, and more.  Last year, we recorded an explosive growth on equipment spending from LED fabs, jumping from $606 million in 2009 to $1.78 billion in 2010. We expect the LED equipment spending spree will continue this year to reach about $2.5 billion, a 40 percent increase year-over-year.  However, if some of the projects do not ramp up as quickly as planned, there might be some spending “delay” to 2012. Still, we remain optimistic about the investment level in 2012 exceeding $2.3 billion worldwide.

The regional equipment spending chart below shows an aggressive investment trend from China. Propped up by subsidy programs from local governments in China, new LED fab projects have blossomed in the past two years in different cities in China with investors from various backgrounds. The result? China accounts for almost 50% of overall equipment spending.

Chart 1: LED Equipment Spending by Region

In $US Million

Chart 1: LED Equipment Spending by Region

Source: SEMI Opto/LED Fab Forecast March 2011

In regards to new LED fabs, we recorded 19 new fabs that started operation in 2010 and we expect to see another 27 new operation fabs this year. The geographic distribution of these new projects is mostly located in Asia, especially from China, Taiwan, and Korea. For 2012, with current information on hand, we count 15 new fabs coming online next year, mostly in China.

Table 1: LED Fabs Start Operation

 

Table 1: LED Fabs Start Operation 

Source: SEMI Opto/LED Fab Forecast March 2011

On the capacity side, according to SEMI’s Opto/LED Fab Forecast, worldwide LED fab capacity reached 4,350 thousand wafers per month (wpm, 2” wafer equivalent). We expect strong demand from LCD backlight to continue to drive the capacity growth in 2011 with a 50 percent increase to reach 6,509 thousand wpm (2” equiv.). On the regional capacity share, Taiwan and China are the two leading regions with largest LED epi/chip capacity in 2011, followed by Japan and Korea. However, in view of the upcoming fabs from China, China’s LED capacity is expected to grow from 1.4 million wpm in 2011 to 2.3 million wpm in 2012 (2” equiv.) becoming the capacity leader.

Chart 2: LED Fab Capacity by Region, 2011

Installed capacity in wafers per month (in 2” equivalents, 4Q 2011 Forecast)

Chart 2: LED Fab Capacity by Region, 2011

Source: SEMI Opto/LED Fab Forecast March 2011

Current investment momentum is clearly driven by strong demand from LCD backlighting in the short-and-medium term and in anticipation of LED adoption in the general lighting market in the longer run. However, there is one other important factor that came into play— government subsidies. We may see some cutback on MOCVD subsidy from local governments in China, and this certainly will have some impact on the scale of LED investments. However, with the announcement of China government’s 12th Five Year Plan, it is believed that China government will continue to foster LED market as a whole which will help the LED market in a more balanced approach. 

SEMI’s Opto/LED Fab Forecast tracks over 250 Opto/LED fabs activities worldwide, with detailed  information on fab construction and equipment spending, key milestone dates, capacity and ramp up schedule, and more.  Portions of this article were derived from the Opto/LED Fab Forecast. This database is an essential business tool for any company keeping track of the Opto/LED frontend fabs. Additional information regarding this report can be found at:

http://www.semi.org/en/Store/MarketInformation/OptoLEDFabForecast

 

SEMI Global Update
April 5, 2011