iLED iLED March issue : 3
MARCH 2012 ISSUE N°3 EDIT ORIAL Following the shortage in 2010, sapphire prices remained high through the fi rst half of 2011 -but a softer-than-expected LED TV market and increasing sapphire capacity combined to quickly bring supply and demand back in check in the second half of 2011. Prices fell accordingly, and as is often the case, the pendulum swung back too far. Two-inch wafer prices were especially hard hit, and bids as low as $7 per wafer were common earlier this year -a price that is below cost for even the most effective sapphire makers. Vendors with a broader product mix comprised of large volumes of 4” and 6” diameter wafers are faring better due to the higher margins on these products, but as large diameter prices fall as well, there’s no doubt everybody is feeling the heat. So where are we headed? Well, even though 2” prices have certainly hit bottom and might rebound slightly toward the $9 mark, the general trend is down: 4” are already one year ahead of our long-term bottom price estimate, and 6” are now offered at below $300 in large volumes, versus up to $450 a year ago. At “Many newcomers will be wiped out of the market before they even make it into the LED supply chain” the same time, competition is heating up. In the last 18 months, more than 50 companies have announced their intent to enter the market. Some have already invested massively in large manufacturing facilities, while others are still at the drawing board. But many might be wise to think twice before committing large amounts of capex. The 2010-2011 pricing environment was forgiving, and allowed new entrants to achieve comfortable margins despite low yields and subpar technologies. In 2012 and beyond, established vendors with higher yields, larger volumes and a favorable product mix will weather the storm, but many newcomers will be wiped out of the market before they even make it into the LED supply chain. Some will succeed though, and they will do so through a combination of effi cient technology and customer access. The big winners in the current market are the new breed of “turnkey” equipment suppliers, who offer semi-automated sapphire crystal growth solutions. But while these have defi nitely lowered the technical barrier of entrance to the market, growing sapphire still requires some expertise, and many companies will soon realize that cutting corners in facilities, maintenance, or raw materials will often do more harm than good to their bottom line. The learning curve can be steep before newcomers are able to reach yields and cost position on par with established tier one manufacturers. Also, many new entrants underestimate the diffi culties associated with getting their products qualifi ed by LED manufacturers. Hidden specifi cations and black magic are still a big part of LED creation, and no serious LED manufacturer will commit to high volumes and long-term contracts with a wafer vendor that has not been thoroughly tested over a long period of time. Making a few good wafers is easy; making millions of them with consistent quality over a long period of time is another story. Dr Eric Virey Senior Analyst, LED Yole Développement virey@yole.fr PLATINUM PARTNERS: For more information, please contact S. Leroy (leroy@yole.fr) i LED 3
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