Asian HB-LED industry sees "phenomenal" growth in 2003

April 15, 2004
Mike Hatcher reports from the 2004 Strategies in Light conference on the spectacular growth in the HB-LED market in Taiwan, Korea and China.
Along with the increasing domination of cell phone handset applications in HB-LED sales has come a shift towards manufacturing in Asia; in particular China, South Korea and Taiwan. HB-LED production in these three countries was the focus of YEBY analyst Bob Walker's presentation at the 2004 Strategies in Light conference.

Taiwan has long been a dominant player in the Asian LED market, together with Japan. Huge investment has been made by Taiwanese companies, and the focus has traditionally been on low-cost production.

Meanwhile, production has increased in South Korea through the development of several highly focused start-up companies and the presence of key semiconductor and consumer goods manufacturers Samsung and LG (see Korean manufacturers focus on white LEDs).

The last 10 years in China have seen sweeping political and economic changes, and this has helped to foster explosive growth of HB-LED manufacturing, particularly back-end processing. Coupled with the huge domestic market and investment, China has also seen several new HB-LED start-ups and epitaxy-based companies emerge, such as Lumei, Podium and Shanghai Blue Light.

However, wafer and chip production in the region is still dominated by the Taiwanese operations (Walker estimates that there are more than 250 MOCVD systems in the country), which accounted for 87% of InGaAlP wafers produced in the region in 2003. China produced 10% and South Korea 3%.
GaN production

Korea makes a much stronger showing in the production of GaN wafers and chips (see graph), which appears to be rooted, at least in part, in the preference for blue backlights in handsets that are made by South Korean phone manufacturers such as Samsung.

The scene is set for this to continue in 2004, with an expected doubling of GaN wafer and chip manufacturing capacity in Taiwan. Walker commented that the InGaAlP overcapacity of 2000-2001 has now been fully utilized and is being expanded on.

Another bubble?

The booming sector is being reflected in the earnings of Taiwanese companies in the HB-LED business. Walker's figures showed that for the Taiwanese industry as a whole, monthly revenue increased three-fold from around $10 million in January 2002 to $30 million by March 2003. A sharp dip followed as a result of the SARS epidemic, but the monthly figure has now recovered and has broken through the $30 million barrier once again.

All the signs point to this increase continuing, although interestingly, both Walker and Bob Steele of Strategies Unlimited warned that with the continuing large investment in capacity they could not rule out future overcapacity similar to that seen in the fiber-optic components industry in recent years. "This could be a bubble," said Steele. "We'll just have to wait and see."

For the moment, however, growth remains rapid. Manufacturers in Taiwan, South Korea and China produced and sold 14.1 billion qualified InGaAlP chips between them in 2003, a 25% increase on the 2002 total. This represents 80% of world production, said Walker.

This was nothing compared with the growth in the GaN sector, which Walker described as "phenomenal". Here, companies in the region produced 3.1 billion qualified chips in 2003, a scarcely believable 700% increase over the previous year. The region now accounts for 40% of world production, whereas just a year ago the figure was around 10%.