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Jessie Lin, DIGITIMES Research, Taipei [Monday 9 July 2012]
The entire LED lighting supply chain can be divided into the following segments: rare earth, MOCVD equipment, sapphire ingots and substrates, LED chips, LED packaging, and LED lighting fixtures. This Digitimes Special Report focuses on the upstream segments including rare earth elements for producing phosphor powder material, MOCVD equipment (for manufacturing LED wafers), sapphire ingots and substrates. The upstream segments are important as they are the indicators for future developments of the industry. Abstract 
The entire LED lighting supply chain can be divided into the following segments: rare earth, MOCVD equipment, sapphire ingots and substrates, LED chips, LED packaging, and LED lighting fixtures. This Digitimes Special Report focuses on the upstream segments including rare earth elements for producing phosphor powder material, MOCVD equipment (for manufacturing LED wafers), sapphire ingots and substrates. The upstream segments are important as they are the indicators for future developments of the industry.
Rare Earth
China's rare earth outputs account for more than 90% of total rare earth supplies in the world. In 2012, the government continues to implement measures to limit the exports of rare earths which has been causing the price of rare earths to increase significantly.
Rare earth is the main ingredient for phosphor powder, an important material for both fluorescent and LED lightings. The difference is that fluorescent lights use large amount of phosphor powder compared to LED lighting. Therefore, as the price of rare earth increases, the cost of producing fluorescent lighting products increases as well. Comparatively, LED lightings only uses a small amount of phosphorus powder and have only been slightly affected by the price increase of rare earths.
MOCVD
After booming demand for MOCVD equipment in 2010-2011, the order visibility in 2012 has been shorter because most LED chipmakers have enough capacity to meet demand. Therefore, Digitimes Research predicts global demand for MOCVD equipment in 2012 will be 275 units, a 60% decrease from 690 units in 2011.
China continues to dominate demand for MOCVD equipment in 2012 because some shipments of MOCVD equipment have been delayed to 2012 and some local governments have continued to provide subsidies for procuring MOCVD equipment. Hence, demand from China in 2012 is to account for 68% of global demand.
Digitimes Research predicts US-based equipment provider Veeco and Germany-based Aixtron will continue to dominate the market in 2012. The combined market share of the two firms in 2012 is expected to reach above 95% and in particular, Veeco's global market share is to reach 60%.
Sapphire
Sapphire ingots and substrates are important upstream materials for LED firms. Currently, most firms use LED epitaxial wafers made from sapphire substrates. Only a few firms adopt silicon (Si) or silicon carbide (SiC) substrates. Hence the price trend and market balance of sapphire substrates are also important indicators for the development of the LED industry.
For 2-inch sapphire substrates, the price stabilized in first-half 2012 at US$8-9/unit. The price is expected to remain steady in second-half 2012 because the current price is close to production costs and has no room for decreases even if there is an oversupply condition of sapphire ingots. However, patterned sapphire substrates (PSS) can help to increase the brightness of LED products effectively, hence the price of the product is likely to show a slight increase in second-half 2012.
Table of contents Introduction Rare Earth Chart 1: Rare earth exports from China, 2009-2012 (k tons) MOCVD Chart 2: Global shipments of MOCVD equipment for LED manufacturing, 2006-2012 (units) Sapphire Chart 3: Price trend of 2-inch sapphire substrates, 2011-2012(US$) Rare Earths market China's rare earth reserves Chart 4: China's rare earth reserve share by geographic location Rare earth exports Chart 5: Rare earth exports from China, 2009-2012 (k tons) Rare earth export quota in China, 1H12 Chart 6: Rare earth export quotas, 1H12 Export tax base expands in 2012 Chart 7: Tax rates of rare earth elements and compounds, 2012 Major rare earth firms in China Chart 8: Major rare earth companies in China Inner Mongolia Baotou Steel Rare-Earth (REHT) Chart 9: REHT 2011 revenue share by product China Minmetals Chart 10: Timeline of China Minmetal Non-Ferrous Metals China Minmetal Rare Earth (CMRE) Chart 11: Ganzhou Rare Earth Mineral Industry background Guangdong Rising Nonferrous Metals Chart 12: Guangdong Rising Nonferrous Metals background and major shareholders Chart 13: Average price of Yttrium and cerium (US$/kg); Revenues of REHT and Guangdong Rising Nonferrous Metals, (CNY billion); 2007-2011 Price trend of rare earths and effect on lighting industry Price changes - June 2011-April 2012 Chart 14: Price trend of rare earths used in phosphs, June 2011-April 2012 (US$/kg) Influence of rare earth pricing on lighting industry Chart 15: Price increase of fluorescent lightings due to rising cost of phosphorus MOCVD market Chart 16: Global shipments of MOCVD equipment for LED manufacturing, 2006-2012 (units) MOCVD demand by region in 2012 Chart 17: MOCVD demand by region, 2012 MOCVD equipment suppliers Chart18: Market share forecast for MOCVD manufacturers, 2012 Veeco Chart 19: Veeco operations in 2012 and future outlook Chart 20: Veeco's revenues, 2008-2012 (US$m) Chart 21: Revenues and value of orders for Veeco's LED & Solar division, 1Q10-1Q12 (US$m) Chart 22: Regional breakdown of Veeco's shipments by value, 3Q10-4Q11 (m US$) Chart 23: Veeco has invested US$30 million in developing the Asia market between 2011 and 2012 Chart 24: Predicted drop in the cost per unit area of LED epitaxial wafers, 2009-2015 (1 is baseline) Aixtron Chart 25: Aixtron's 2012 operations and outlook (EURm) Chart 26: Order values and overall revenues for Aixtron, 4Q10-1Q12 (EURm) Chart 27: Aixtron's revenue share by geographic region, 4Q10-1Q12 Chart 28: Value of order backlog for Aixtron, 3Q10-1Q12 (m EUR) Chart 29: Aixtron's inventory value and stock turnover period, 4Q10-1Q12 (EURm, days) Chart 30: Aixtron's 2012 operational outlook and 2013 development Tai Nippon Sanso Taiyo Nippon Sanso Chart 31: Taiyo Nippon Sanso's MOCVD revenues, 1H08-2H11 financial years (JPYm) Chart 32: Taiyo Nippon Sanso's implentation of its new Gear Up 10 medium-term plans Chart 33: Taiyo Nippon Sanso and PSK have founded the joint venture TNSK Chart 34: Taiyo Nippon Sanso develops its UR26K large-diameter MOCVD unit Sapphire market Pricing trends Chart 35: Price trend of 2-inch sapphire substrates, 2011-2012(US$) Patterned sapphire substrates (PSS) prices to rise Main sapphire makers Chart 36: Market share of major sapphire crystal growing firms, 2H11 Chart 37: Rubicon, STC revenue comparison, 2006-2011 (US$m) Capacity comparison of major sapphire suppliers Chart 38: Capacities of four major sapphire crystal growing firms, 2012 (k mm/month) Rubicon Chart 39: Regional revenue changes of Rubicon, 2007-2011 (US$m) Chart 40: Rubicon revenue and gross profit ratio trends, 3Q10-1Q12 (US$m) Chart 41: Rubicon 6-inch sapphire substrate business, sales and share of total revenues, 4Q10-1Q12 (US$ million) Chart 42: Revenue share of Rubicon 6-inch sapphire substrates, 3Q11-1Q12 Chart 43: Rubicon business forecast, 2Q12 Chart 44: Rubicon business forecast, 2H12 Chart 45: Rubicon business forecast, 2012-2013 Chart 46: Rubicon plans to reduce production costs of sapphire, 2012-2013 Chart 47: Rubicon's expansion plans for Batavia and Penang plants STC Chart 48: South Korea's development plan for sapphire for LED products, 2010-2019 Chart 49: STC sapphire ingot annual capacity and utilization rate, 2008-1Q12 (k mm) Chart 50: STC revenues, operating profit ratios, and profits, 2007-1Q12 KRW billion Chart 51: STC revenue share by sapphire ingot size, 2009-1Q12 Chart 52: STC domestic and international share of sales by sapphire ingot size, 2011 China companies Chart 53: Capacity plans published in 2011 and 2012 by China's major sapphire substrate manufacturers (m substrates) GCL OE plans to bring in 320 sapphire production units by 2015 Chart 54: Capacity and developed plans for GCL OE's sapphire business (m substrates) Silian has set a target of growing its LED-related business to CNY10 billion by 2015 Chart 55: Silian's sapphire capacity plans and overall LED business activities (m substrates) Crystaland has achieved real results in terms of mass producing two-inch and four-inch sapphire ingots Chart 56: Crystaland's products and capacity plans Sanan invests in sapphire subsidiary Jingan Optoelectronics, production expected to begin in 2013 or 2014 Chart 57: Funding details for Sanan's sapphire subsidiary Jingan Optoelectronics Trends for sapphire makers in the Jiangsu and Shandong areas Chart 58: Capacity plans for sapphire makers in the Jiangsu and Shandong areas, 2011-2012 Trends for sapphire makers in the Zhejiang and Anhui regions Anhui Province is a major center for LED chip manufacturing and is also home to sapphire makers Crystalbridge and NGC Chart 59: Capacity plans for sapphire makers in the Zhejiang and Anhui regions, 2011-2012 Sapphire makers in the North China and Central China regions Chart 60: Capacity plans for sapphire makers in the North China and Central China regions, 2011 and 2012 Trends for sapphire makers in Northeast China and Southwest China Chart 61: Capacity plans for sapphire makers in the Northeast China and Southwest China regions, 2011 and 2012 Korea companies DK Aztec Chart 62: DK Aztec overview Chart 63: DK Aztec sapphire crystal growing capacity, 2010-2012 Chart 64: DK Aztec revenues and forecast, 2009-2012 (KRWb) Hansol Technics Chart 65: Hansol Technics overview Chart 66: Hansol Technics sapphire business investments, 2010-1H12 9 (KRWb) Chart 67: Hansol Technics capacity of sapphire products for LEDs, 2011-2012 (mid-end) Chart 68: Hansol Technics capacity expansion plans for sapphire crystal growing and substrates, 2012 (million units) Chart 69: Hansol Technics revenues from sapphire products, 2011-2012 (KRWb) OCI Chart 70: OCIoverview Chart 71: OCI sapphire capacity and revenue targets, 2012 Chart 72: OCI sapphire crystal growing capacity share, 2012-2015
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