China’s LED industry speeds up
In 2008, the industry’s growth rate was affected by the sluggish downstream demand, which was a result of the global financial crisis. In 2009, with the state’s various supporting policies, the industry’s growth rate began to pick up. In 2010, driven by the rapid development of the downstream full colour LED display, LED backlight, LED lighting and other applications, the size of China’s LED industry covering substrate, epitaxial, chip and packaging surged to RMB 29.46 billion, up 33.8% from 2009. Meanwhile, the CAGR of China’s LED industry stayed at 18.7% from 2006 to 2010. Figure 1 Size of China’s LED Industry, 2006-2010 Although the substrate sector still features low-end products, the sapphire sector has geared up for expansion. In recent years, the development of China’s substrate sector has been relatively slow compared with epitaxial, chip, and packaging sectors due to its backward technology and the fierce market competition. In 2010, as various sapphire substrate projects were still under construction or in the process of equipment testing, which kept the production capacity from a significant expansion, the substrate sector still featured low-end products with a limited production capacity of sapphire substrate. In 2010, China’s substrate sector had a capacity of 3.525 million square inches, up 34.4% from 2009, with an output value of RMB 140 million, up 50.8% from 2009. Figure 2 Size of China’s LED Substrate Sector, 2006-2010 Supported by National Semiconductor Illuminating Project and State 863 Program, China’s GaAs/InP/GaP substrate technologies used for red light and green light LED production have achieved great progress. Mass production of the materials has been realized in enterprises including Compound Crystal Technology Co., Ltd, Guorui Electronic Materials Co., Ltd, Shanghai Pujia Optoelectronic Materials Co., Ltd. and the 46th Research Institute of CETC. Their total LED substrate output account for around 30% of the country’s total, which makes China self-sufficient on such types of substrate. In 2010, driven by the rapid development of the downstream LED backlight and LED illumination sectors and the rapid expansion of GaN epitaxial and chip production capacity, supplies of the upstream sapphire, SiC, GaN substrates applied in blue light and white light LEDs went tight with prices continuing to rise. Despite the yet immature technologies for such materials and the lack of qualified talents, many domestic enterprises started to enter the field of sapphire substrate field in pursuit of the high profit in 2010 and continued to increase investment and introduce key technologies. Most of those enterprises were located in the eastern coastal area and the southwest, along with a few in the inland areas. Among them, Tianjin Sapphire, Qingdao iStarWafer and Peter Stone Love have begun to supply sapphire substrate products, while Silian Group, which entered the sapphire substrate sector in 2008 through the acquisition of the internationally renowned manufacturer Honeywell’s sapphire substrate factory in Canada and its technologies, is constructing a sapphire substrate base in Chongqing Municipality. By the end of 2010, the first phase of Silian Group’s sapphire substrate project had been commissioned, and production had begun at partial capacity. Meanwhile, Yunan Crystaland, Harbin Aurora Optoelectronics Technology Co., Ltd and other enterprises with independent crystal bar technology have been producing sapphire substrate at a small scale. Xiexin Optoelectronics, Eurasian Rainbow Optoelectronics Technology and TDG Holding began to enter the sapphire crystal bar and substrate sector in 2010, while Zhejiang Crystal-Optech and Xi’an Shenguang Anrui Optoelectronics Technology are preparing to enter in 2011 and the first phase of ZheJiang East Crystal Electronic Co., Ltd’s 7.5-million sapphire wafer for LED technical upgrade project is planned to start mass production by the end of 2012. Generally speaking, the supply of sapphire substrate will remain tight in the coming three years at least judging by the capacity expansion rate. However, as the sector starts to absorb massive investment in 2011 to expand production capacity, the proportion of sapphire substrate output against the total LED substrate output is sure to surge and overtake the quaternary system products. Epitaxial sector sees rapid capacity expansion and product upgrade. LED epitaxial is the core of the LED industry. Driven by high-speed development of China’s downstream application market, GaN MOCVD has seen an explosive growth in China since 2009, which provided great momentum for the epitaxial sector of China’s LED industry. In 2010, the number of MOCVD under construction and commissioned was close to 300, more than 200 of which had begun mass production, and the output value of China’s LED epitaxial sector reached RMB 1.25 billion, up 78.4% from 2009. As for the specific products, AlGaInP epitaxial mainly used in red light LED products is a leading product in China due to its stable growth mechanism and material properties. However, its growth rate is far behind that of GaN epitaxial wafer because the demand from its relatively mature application market is expanding slowly. In 2010, the output of AlGaInP/AlGaAs/GaAsP/GaP epitaxial wafer accounted for 60.2% of the total epitaxial wafer output, down 15.8% from 2009. Besides, supported by the rapidly expanding application market of blue and white light LEDs in landscape lighting and backlight and technical breakthroughs, the GaN epitaxial wafer output accounted for 39.8% of China’s total epitaxial wafer output in 2010. It is expected that the GaN epitaxial wafer output will exceed that of AlGaInP epitaxial wafer in 2011. With regard to supplies, China is basically self-sufficient on epitaxial wafer supplies for normal-bright red light LEDs, but still relies on imports of quality AlGaInP epitaxial wafer from Taiwan and Korea for the production of super bright red light LEDs. Besides, the country also has to import GaN epitaxial wafers due to the small production capacity and interior quality of domestic products. Figure 3 Size of China’s LED Epitaxial Sector, 2006-2010 As the production of LED epitaxial products requires massive investment, advanced technologies and experienced professionals, most of the epitaxial wafer manufacturers are located in China’s wealthy areas in the east and the south. With the expansion of the epitaxial market demand, new enterprises will continue to enter this sector, while the existing ones will seek to expand their capacity. For example, Sanan Optoelectronics has started to establish LED facilities in Tianjin and Anhui Provinces’ Wuhu City in addition to its existing plants in Xiamen. Meanwhile, apart from the favoured locations of Shanghai, Xiamen and Yangzhou, new comers are also beginning to locate their facilities in central China.