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Yole: LED packaging cost reduction is key

III-nitride LED packaging will drive new technology and design adoption
Depending on the device type, packaging can represent 40 to 60 percent of total LED cost.

As such, packaging represents the single‐largest opportunity for cost reduction, which is required in order for the industry to access the “Holy Grail” that is General Lighting.

However, if you’re expecting this cost reduction to come from standardisation, you can abandon all hope. The creativity of LED engineers and specificities of each application have led to an infinite number of package type and formats.

These include single or multiple chips, low and middle‐power plastic leaded chip carrier, ceramic‐based high‐power LEDs, small and large arrays and chip on board devices. This profusion of styles is inhibiting LED manufacturing cost reduction by multiplying the stock keeping unit and preventing standardisation of the manufacturing process and the associated economies of scale.

In this context, LED manufacturers are reacting by developing new manufacturing concepts such as:

- “Design for manufacturing”, which consists of trying to simplify and standardise elements whenever possible, and push differentiation as far downstream as possible in the manufacturing process.

‐ “Design for cost”, which consists of favouring cost of ownership or cost per lumen over end performance.

“Technological developments are also impacted by the quest for cost reduction, and LED manufacturers are now searching for equipment and/or materials with the right mix between cost and performance", explains Pars Mukish, Technology & Market Analyst, LED at Yole Développement.

Also, equipment and materials suppliers are proposing more and more equipment and materials that fit these requirements, such as. laser‐based dicer, low‐cost ceramic package substrate among other things.

In the end, LEDs are going mainstream but are still not a mature commodity. This is good news for the entire industry, since design and materials innovation still provides opportunity for differentiation. All of this benefits the consumer, who receives budget‐friendly, environmentally friendly and increasingly credible LED‐based alternatives for replacing traditional light sources.

The LED packaging materials market will enjoy a 20 percent CAGR during the period 2012 ‐ 2017, driven primarily by package substrate and phosphors. The package substrate market will attain a CAGR of 20 percent over the aforementioned period, growing to nearly $900 million by 2017.

Concerning LED phosphors, despite strong price pressure, the associated market will also enjoy double‐digit growth, with a CAGR of 20 percent during the period 2012 ‐ 2017.

In the face of intensifying competition, players are trying to differentiate themselves by proposing an increasing variety of technology options for LED packaging. Substrate material options as well as assembly and interconnection techniques abound as many companies work around the limiting patents of the established players.

New players from the general semiconductor markets are proposing new solutions based on their respective capabilities. Similar to IC packaging, new technologies for LED packaging mimic the existing ones, without completely phasing them out ‐ and there is still a lot of room for innovation, which could lead to more added‐value. For such products, however, it remains paramount that the solution offers LED manufacturers an overall reduction in cost of ownership ($/lumen).

At the LED packaging equipment level, growth will return for the next three years “The LED packaging equipment market, which stagnated in 2012 due to industry oversupply, is growing again and will peak at nearly $650 million by 2016”, says Pars Mukish.

He adds LED packagers are still using mostly retrofitted equipment from the IC industry and relying on existing technology solutions and materials to improve LED cost of ownership and performance.

While this has allowed LED manufacturers to benefit from decades of R&D, and investments in the IC industry, it also limits the industry to a space defined by existing technology platforms which are not optimised to the specific needs of LEDs. However, the industry has gained enough momentum in 2011/2012 to entice equipment and material providers into developing dedicated solutions for LED manufacturing.

Many dedicated solutions emerging from both existing and new players will allow significant reduction in LED manufacturing cost through improved yields, throughputs and material efficiency.

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