Technical Insight
Production ramps in Asia as cell phones push up HB-LED demand
As mobile phone handsets continue to be the key driver behind growth in HB-LED manufacturing, Michael Hatcher reports from the Strategies in Light conference on a serious ramp-up of production capacity in Asia, "kilolumen" sources and the development of LED headlamps.
The market for high-brightness (HB) LEDs is currently one of the fastest-growing sectors for compound semiconductor devices. At the annual Strategies in Light conference held in San Mateo, CA, in February, analyst Robert Steele told delegates that the market grew 47% in 2003 to reach $2.7 billion. Steele s figures show that the HB-LED market has grown 350% since 1995, which also represents a compound annual growth rate (CAGR) of 47%.
Steele calculated that a significant part of last year s increase arose from the relative weakness of the US dollar (Steele s estimate was that this factor had an impact of 10-15%). However, the key growth area continues to be mobile handset applications. Phones with full-color displays and blue-backlit keypads have ensured that this segment continues to dominate, with HB-LED sales into the mobile appliance market booming 87% to reach $1.37 billion last year.
Steele s latest figures showed that mobile appliances accounted for 50% of the HB-LED market in 2003. Signage was the next-biggest segment with 18%, followed by automotive applications at 15%. Illumination accounted for 5% of current HB-LED sales. All these segments enjoyed solid growth, with a minimum of 21% market increase, in 2003.
Steele now expects the mobile market to start leveling out, putting a brake on the overall market growth. He predicted that the CAGR for HB-LEDs will fall to 17% between now and 2008. Price erosion will also start to have a bigger impact. However, for high-end devices, where there are relatively few suppliers, prices are expected to remain close to current levels.
"Phenomenal" growth in AsiaAlong with the increasing domination of cell phone handset applications in HB-LED sales has come a shift towards manufacturing in Asia; in particular China, South Korea and Taiwan. HB-LED production in these three countries was the focus of YEBY analyst Bob Walker s presentation.
Taiwan has always been the dominant player in the Asian market outside Japan. Walker identified 11 wafer-manufacturing companies in Taiwan (see table). Their emergence is testament to a huge investment in the country and the low cost of devices produced there. Meanwhile, production has increased in South Korea through the development of several highly focused start-up companies and the presence of key semiconductor and consumer goods manufacturers Samsung and LG.
The last 10 years in China have seen sweeping political and economic changes, and this has helped to foster explosive growth of HB-LED manufacturing, particularly back-end processing. Coupled with the huge domestic market and investment, China has also seen several new HB-LED start-ups and epitaxy-based companies emerge, such as Lumei, Podium and Shanghai Blue Light.
However, wafer and chip production in the region is still dominated by the Taiwanese operations (Walker estimates that there are more than 250 MOCVD systems in the country), which accounted for 87% of InGaAlP wafers produced in the region in 2003. China produced 10% and South Korea 3%. The story for GaN-based wafers and chips is broadly the same, with 73% of GaN wafers made in Taiwan, 16% in South Korea and 11% in China. The relative strength of South Korea in this technology appears to be rooted, at least in part, in the preference for blue backlights in handsets that are made by South Korean phone manufacturers such as Samsung.
The scene is set for this to continue in 2004, with an expected doubling of GaN wafer and chip manufacturing capacity in Taiwan. Walker commented that the InGaAlP overcapacity of 2000-2001 has now been fully utilized and is being expanded on.
Another "bubble"?The booming sector is being reflected in the earnings of Taiwanese companies in the HB-LED business. Walker s figures showed that for the Taiwanese industry as a whole, monthly revenue increased three-fold from around $10 million in January 2002 to $30 million by March 2003. A sharp dip followed as a result of the SARS epidemic, but the monthly figure has now recovered and has broken through the $30 million barrier once again. All the signs point to this increase continuing, although interestingly, both Walker and Steele warned that with the continuing large investment in capacity they could not rule out future overcapacity similar to that seen in the fiber-optic components industry in recent years. "This could be a bubble," said Steele. "We ll just have to wait and see."
For the moment, however, growth remains rapid. Manufacturers in Taiwan, South Korea and China produced and sold 14.1 billion qualified InGaAlP chips between them in 2003, a 25% increase on the 2002 total. This represents 80% of world production, said Walker.
This was nothing compared with the growth in the GaN sector, which Walker described as "phenomenal". Here, companies in the region produced 3.1 billion qualified chips in 2003, a scarcely believable 700% increase over the previous year. The region now accounts for 40% of world production, whereas just a year ago the figure was around 10%.
Steele calculated that a significant part of last year s increase arose from the relative weakness of the US dollar (Steele s estimate was that this factor had an impact of 10-15%). However, the key growth area continues to be mobile handset applications. Phones with full-color displays and blue-backlit keypads have ensured that this segment continues to dominate, with HB-LED sales into the mobile appliance market booming 87% to reach $1.37 billion last year.
Steele s latest figures showed that mobile appliances accounted for 50% of the HB-LED market in 2003. Signage was the next-biggest segment with 18%, followed by automotive applications at 15%. Illumination accounted for 5% of current HB-LED sales. All these segments enjoyed solid growth, with a minimum of 21% market increase, in 2003.
Steele now expects the mobile market to start leveling out, putting a brake on the overall market growth. He predicted that the CAGR for HB-LEDs will fall to 17% between now and 2008. Price erosion will also start to have a bigger impact. However, for high-end devices, where there are relatively few suppliers, prices are expected to remain close to current levels.
"Phenomenal" growth in AsiaAlong with the increasing domination of cell phone handset applications in HB-LED sales has come a shift towards manufacturing in Asia; in particular China, South Korea and Taiwan. HB-LED production in these three countries was the focus of YEBY analyst Bob Walker s presentation.
Taiwan has always been the dominant player in the Asian market outside Japan. Walker identified 11 wafer-manufacturing companies in Taiwan (see table). Their emergence is testament to a huge investment in the country and the low cost of devices produced there. Meanwhile, production has increased in South Korea through the development of several highly focused start-up companies and the presence of key semiconductor and consumer goods manufacturers Samsung and LG.
The last 10 years in China have seen sweeping political and economic changes, and this has helped to foster explosive growth of HB-LED manufacturing, particularly back-end processing. Coupled with the huge domestic market and investment, China has also seen several new HB-LED start-ups and epitaxy-based companies emerge, such as Lumei, Podium and Shanghai Blue Light.
However, wafer and chip production in the region is still dominated by the Taiwanese operations (Walker estimates that there are more than 250 MOCVD systems in the country), which accounted for 87% of InGaAlP wafers produced in the region in 2003. China produced 10% and South Korea 3%. The story for GaN-based wafers and chips is broadly the same, with 73% of GaN wafers made in Taiwan, 16% in South Korea and 11% in China. The relative strength of South Korea in this technology appears to be rooted, at least in part, in the preference for blue backlights in handsets that are made by South Korean phone manufacturers such as Samsung.
The scene is set for this to continue in 2004, with an expected doubling of GaN wafer and chip manufacturing capacity in Taiwan. Walker commented that the InGaAlP overcapacity of 2000-2001 has now been fully utilized and is being expanded on.
Another "bubble"?The booming sector is being reflected in the earnings of Taiwanese companies in the HB-LED business. Walker s figures showed that for the Taiwanese industry as a whole, monthly revenue increased three-fold from around $10 million in January 2002 to $30 million by March 2003. A sharp dip followed as a result of the SARS epidemic, but the monthly figure has now recovered and has broken through the $30 million barrier once again. All the signs point to this increase continuing, although interestingly, both Walker and Steele warned that with the continuing large investment in capacity they could not rule out future overcapacity similar to that seen in the fiber-optic components industry in recent years. "This could be a bubble," said Steele. "We ll just have to wait and see."
For the moment, however, growth remains rapid. Manufacturers in Taiwan, South Korea and China produced and sold 14.1 billion qualified InGaAlP chips between them in 2003, a 25% increase on the 2002 total. This represents 80% of world production, said Walker.
This was nothing compared with the growth in the GaN sector, which Walker described as "phenomenal". Here, companies in the region produced 3.1 billion qualified chips in 2003, a scarcely believable 700% increase over the previous year. The region now accounts for 40% of world production, whereas just a year ago the figure was around 10%.
