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LED substrate makers recoil at price falls

Sapphire wafer sales will reach $400m by 2012 across LED and RF applications, predicts Yole Developpement, but in the meantime prices are likely to be volatile.

Western sapphire producers are ceasing to supply Taiwanese GaN LED manufacturers, preferring to trade in more profitable areas of the electronic substrate market.

Market analyst Yole Développement's 2008 report on the industry highlights “huge pressure” forcing 2-inch wafer prices down to $17, to help chip makers deliver die at 2-3 cents each.

Philippe Roussel, the report s author, told compoundsemiconductor.net that Asian and Russian sapphire suppliers now increasingly dominate sales into Taiwan s LED-making hotbed, although US producer Rubicon remains involved.

Other suppliers are focusing on markets elsewhere in the world, where a 2-inch sapphire substrate will typically fetch $25 and where $170-180 4-inch substrates are beginning to be introduced. This price differential makes the world's biggest LED players "“ who are largely based outside of Taiwan "“ best positioned to begin 4-inch manufacture.

“Everything is in the price,” Roussel said. “Today the 4-inch wafer is very expensive, and from a financial point of view you have to be very careful before entering production on these.” He says that Osram and Showa Denko have already started to migrate parts of their production to the larger diameter substrate.

The LED industry was responsible for over $100 million in sapphire substrate revenues in 2007, according to Yole s Sapphire market 2008 report. Roussel predicts sales will increase at a compound annual growth rate of 15 percent and expects steady volume expansion, although he sees price “turbulence” over the period.

He also asserts that sales into silicon-on-sapphire (SoS) RF applications "“ for which Peregrine Semiconductor is almost exclusively responsible "“ will exceed $100 million by 2011.

Roussel concedes that GaAs RF markets won t be imminently threatened as the novelty of Peregrine s technology is currently holding it back. “It s a strange situation, where one company owns all the patents, and the customers don t like this,” he said.

Roussel says that Peregrine is now trying hard to spread the risks its customers perceive by licensing its technology for Japanese electronics firm Oki to make and market by itself. On top of this, the company is currently moving to outsource most of its production to foundries.

Together the LED and SoS markets will amount to a $400 million market by 2012, the report predicts.

Asian sapphire producers such as Kyocera, Namiki, Shinkosha, Fujimi and Sumitomo Metal currently collect 67 percent of the market s revenues. Russia s Monocrystal and French materials giant Saint-Gobain lead the European suppliers, who claim 20 percent of total sales, while Rubicon is the main driver of the North American market that accounts for the remaining revenues.

Rubicon has recently pushed out deliveries of sapphire substrates from the last quarter of 2008 into 2009, in part due to Peregrine's reorganization (see related stories). However, according to Roussel this also characterizes a trend that is being seen across the market.

“Everyone was betting on the fact that LEDs for LCD backlights would happen now, but the supply chain was not properly in place,” he said. “It will reach the levels that people predict, but maybe not right now as the final system price is still high.”

• The Sapphire market 2008 report is now available for €3,990 from Yole Développement.

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