According to the LED/Opto Fab Forecast produced by SEMI, a global industry association, spending on LED fab manufacturing equipment will drop to $1.68 billion in 2013, down from $1.85 billion in 2012. The outlook for equipment spending in 2014 is currently projected at less than $1 billion.
SEMI recently published its first HB-LED standard, which relates to sapphire substrates.
Weak demand outlook for LEDs
LED manufacturers are currently assessing an uncertain competitive environment and potential alternative manufacturing strategies.
The decline in manufacturing-equipment investment is linked with the fact that demand for packaged LED components is at or nearing its peak, despite growing LED demand for solid-state lighting (SSL) applications. Last year, Strategies Unlimited forecasted that demand for LEDs would peak in 2012 or 2013 at approximately $13.3 billion, declining to less than $13.0 billion in 2014.
Among the reasons for weak long-term demand is that the LED count per system is falling. Also, the long life of LED-based lighting systems is radically reducing the replacement lamp market.
GaN on silicon
Excess LED manufacturing capacity is still a feature of the industry, and this continues to place price pressures on LED components. With this in mind, manufacturers are cautious in embarking on major new manufacturing investments. Low fab utilization is also delaying the transition to 6-inch sapphire wafers.
In addition, new GaN-on-silicon products are just now reaching the market, creating further uncertainty. Last month, Toshiba announced the beginning of production of white LEDs using GaN on 8-inch silicon substrates, utilizing depreciated IC fabs with modern automation tools. Working with technology from Bridgelux, Toshiba has reportedly indicated they will eventually ramp to 10 million units per month.
Germany-based Azzurro Semiconductors announced that Taiwan-based LED maker Epistar has successfully migrated their LED structures to its 150-mm GaN-on-Si templates and the company is feverishly working on 200-mm technology. Philips, Osram and Samsung are all actively exploring GaN-on-silicon technology.
GaN on silicon could be a game-changer in the LED market, but its impact is still uncertain. Yole Developpement estimates that significant cost benefits can only occur if equivalent yields to sapphire processes can be achieved, and that production utilizes fully amortized 200mm lines. Sapphire wafer prices have significantly declined over the past 18-months, lessening the benefits of a move to silicon.
Apart from major substrate technology changes, manufacturing spending will increasingly be focused on yield rather than capacity and throughput. Equipment, materials and technology suppliers who can deliver a return-on-investment through improved manufacturing yields can still prosper in the weakened market.
China pursues LED leadership
China’s 12th Five Year Plan took effect in 2011 and renewed the country’s commitment to LED and SSL technologies. While the massive MOCVD spending of 2010/2011 has significantly declined, China remains the leading region in manufacturing investments.
China will be the largest market for LED fab equipment in 2013 with projected spending of $667 million, approximately 40% of the total worldwide spending and almost double Japan’s spending, the second largest region. In 2011, China spent over $1.2 billion on LED fab manufacturing equipment.
China’s generous national and local subsidy programs behind the massive industry development (China now has 82 LED fabs, up from only 16 in 2006) have all but disappeared, but the country remains committed to developing all sectors of the LED industry.
China is a major consumer of LEDs in signage, mobile displays, TVs, and lighting that utilize low and mid-power LEDs that Chinese suppliers specialize in. Energy conservation through SSL is a national priority.
Most observers predict a consolidation of the China LED industry, with perhaps one of two companies emerging as global powerhouses. While much of China’s LED capacity is dormant, in transition or reliant on older technology, companies such as SanAn and ETi will invest new and upgraded manufacturing technology over the next two years.
Industry structure implications
Another troublesome aspect of the LED industry is that nearly 70% of the LED market is supplied by only ten companies, most of whom are directly involved in manufacturing lighting systems. Increasingly, the LED components may be seen as loss leaders offering little incentive for manufacturing investments.
With falling average selling prices (ASPs), soft demand, vertically-integrated customers, and increasing supply of quality products from China and elsewhere, the outlook for continued LED manufacturing investments will be limited for the foreseeable future.
Strategies in Light
Tom Morrow will be providing a keynote address during the Manufacturing Track at the Strategies in Light (SIL) conference on February 12, 2013. SEMI members can receive a special discount rate with a saving of up to $200 to attend the Manufacturing Track. Register for SIL with the promo code “SEMI”.
SEMI HB-LED Standards
The SEMI HB-LED Wafer Task Force, Equipment Automation Task Force, and Impurities & Defects Task Force will be meeting in conjunction with the Strategies in Light conference http://www.strategiesinlight.com/index.html (February 12-14, 2013) in Santa Clara, California.
Following Strategies in Light, the North American HB-LED committee and its task forces will meet in conjunction with the NA Standards Spring 2013 meetings (April 1-4) in San Jose, California. For more information and to register for these meetings, please visit the SEMI Standards website.
This article is presented courtesy of the SEMI organization and originally appeared on the SEMI website.