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$8-9/unit. The price is expected to remain steady in second-half 2012 because the current price is close to production costs and has no room for decreases even if there is an oversupply condition of sapphire ingots. However, patterned sapphire substrates (PSS) can help to increase the brightness of LED products effectively, hence the price of the product is likely to show a slight increase in second-half 2012.
Chart 2: Global shipments of MOCVD equipment for LED manufacturing, 2006-2012 (units)
Chart 3: Price trend of 2-inch sapphire substrates, 2011-2012(US$)
Chart 4: China's rare earth reserve share by geographic location
Chart 7: Tax rates of rare earth elements and compounds, 2012
Chart 12: Guangdong Rising Nonferrous Metals background and major shareholders
Chart 14: Price trend of rare earths used in phosphs, June 2011-April 2012 (US$/kg)
Chart 15: Price increase of fluorescent lightings due to rising cost of phosphorus
Chart 16: Global shipments of MOCVD equipment for LED manufacturing, 2006-2012 (units)
Chart18: Market share forecast for MOCVD manufacturers, 2012
Chart 21: Revenues and value of orders for Veeco's LED & Solar division, 1Q10-1Q12 (US$m)
Chart 22: Regional breakdown of Veeco's shipments by value, 3Q10-4Q11 (m US$)
Chart 23: Veeco has invested US$30 million in developing the Asia market between 2011 and 2012
Chart 26: Order values and overall revenues for Aixtron, 4Q10-1Q12 (EURm)
Chart 27: Aixtron's revenue share by geographic region, 4Q10-1Q12
Chart 28: Value of order backlog for Aixtron, 3Q10-1Q12 (m EUR)
Chart 29: Aixtron's inventory value and stock turnover period, 4Q10-1Q12 (EURm, days)
Chart 30: Aixtron's 2012 operational outlook and 2013 development
Chart 31: Taiyo Nippon Sanso's MOCVD revenues, 1H08-2H11 financial years (JPYm)
Chart 32: Taiyo Nippon Sanso's implentation of its new Gear Up 10 medium-term plans
Chart 33: Taiyo Nippon Sanso and PSK have founded the joint venture TNSK
Chart 34: Taiyo Nippon Sanso develops its UR26K large-diameter MOCVD unit
Chart 35: Price trend of 2-inch sapphire substrates, 2011-2012(US$)
Chart 36: Market share of major sapphire crystal growing firms, 2H11
Chart 38: Capacities of four major sapphire crystal growing firms, 2012 (k mm/month)
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 42: Revenue share of Rubicon 6-inch sapphire substrates, 3Q11-1Q12
Chart 46: Rubicon plans to reduce production costs of sapphire, 2012-2013
Chart 47: Rubicon's expansion plans for Batavia and Penang plants
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
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)
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
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
Trends for sapphire makers in Northeast China and Southwest China
Chart 63: DK Aztec sapphire crystal growing capacity, 2010-2012
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 69: Hansol Technics revenues from sapphire products, 2011-2012 (KRWb)
Chart 72: OCI sapphire crystal growing capacity share, 2012-2015