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Chipmakers Will Reap The Rewards Of An Explosion In LED TV Sales

Sales of LED-backlit TVs will rocket over the next fives years, leading to domination of this market. Richard Stevenson quizzes Strategies Unlimited’s Robert Steele on the reasons behind this tremendous growth, and its implications for LED chipmakers and MOCVD tool manufacturers.

LCD TVs with backlights based on an array of LEDs were launched onto the market back in 2004, and for the first few years they only delivered modest sales. “But this year the market is taking off," says Robert Steele, the director of the LED practice at market analyst Strategies Unlimited. He expects LED-backlit TVs to capture a two or three percent share of TVs sales this year, and rise at a staggering rate to take a market share of between 40 and 60 percent by 2013. By then LED sales will generate $6 billion per year, which is $1 billion more than the entire market for LEDs in 2009.

 




This hike in LED demand will deliver a tremendous benefit to the compound semiconductor community. It will not only drive up volumes for chipmakers – it will also increase sales of sapphire substrates, metal organic precursors and process and carrier gases. And MOCVD tool manufacturers such as Veeco and Aixtron will sell more reactors, thanks to the additional demand for LED chips.

The reason why it has taken five years for LED-based TVs to start to make a commercial impact is that the early versions were far too expensive. Sony was the first to market with this technology - in 2004 it had a domestic launch of this class of TV, which employed LEDs made by Philips Lumileds. The 40 inch version retailed for around $7500, and the 46 inch sibling had a price tag of $10,000. Prices have fallen since then, but some high-end models still cost several thousand dollars.

The current success in LED-based TV is being led by the Korean electronics giant Samsung, and Steele says that this company is expecting fast growth of this part of its business. Prices of its sets are far less than those of Sony – a 40-inch model can be picked up for just under $1500, and some retailers are selling a 46-inch version for less than $2000. This means that prices are still more than those for LCD TVs with cold cathode fluorescent (CCFL) backlights, but the additional premium to pay for this technology has fallen to just $700-800, and it is projected to fall even further later this year and into 2010.

Steele points out that Samsung has entered this market aggressively, and backed the launch of its TVs with a marketing campaign that is reportedly worth tens of millions of dollars. He explains that this effort has been motivated by Samsung’s decision to eventually exit the market for CCFLbacklit LCD TVs, which is tremendously competitive and operates on very small profit margins. LED backlit TVs promise to generate higher profits for the company, and help to promote the Samsung brand.

Why buy an LED TV?

The primary benefits of buying LEDbased TVs have shifted over the last couple of years. Originally the strength of this form of TV was superior picture quality. Samsung, for example, boasted of deeper blacks and outstanding contrast ratios in its 2008 models that employed a direct backlight approach. However, in 2009 it is promoting the stylish thinness of its LED backlit sets, which have moved to an edgelit approach.Both types of architecture eliminate mercury in the backlights, and Samsung claims that the switch from CCFLs to LEDs can also reduce power consumption by up to 40 percent. Steele says that Samsung may sell as many as 2 million sets in 2009.

However, he tempers that by adding that it is difficult to provide an accurate estimate of the company’s sales for this year. Although Samsung has shipped many sets to retailers, some are just sitting on shelves and gathering dust. This is not surprising given the backdrop of a nasty recession, and shops that are full of discounts on all forms of TV. However, if Samsung decides to reduce the price difference of its sets over those built with CCFL backlights during the Christmas holiday season, then it could sell substantial numbers of TVs in the final few weeks of 2009.

Samsung has reduced the cost of its LED backlights by using white LEDs, rather than a combination of red, green and blue ones. Color mixing three sources is more complicated, according to Steele, because the output from each type of chip shifts with time, and this alters the color balance. So a feedback mechanism is employed to constantly maintain the optimum white light output, which involves measurements of the spectral output, followed by adjustments to the driving conditions of the device. This is complex, and it adds to the production cost of the display.

In the past, TV manufacturers have shied away from using white LEDs, due to their limited color gamut. Traditionally, the white light output from the LED results from combining the blue emission from the chip with that produced from excitation of a yellow-emitting phosphor. This means that the emission in the red region of the visible spectrum is relatively dim. But this weakness can be overcome by using white LEDs that combine a blue emitting chip with red and green-emitting phosphors. “The stability of the phosphor is important," explains Steele, because any variations in output will lead to changes in the color balance of the white-emitting display.

Back lit or edge lit?

Steele says that Samsung’s first design of LED-backlight TV included a two-dimensional array of emitters. This enables local dimming of the screen, leading to excellent contrast ratios. However, Samsung has subsequently switched to an edge-lit architecture that substantially cuts the number of LEDs in the backlight. According to Steele, backlighting with a two dimensional array of LEDs directly behind the screen requires 1,000 to 2,000 devices, while side illumination uses several hundred. However, these need to be more powerful, and in this case the LEDs are driven at 50-60 mA, as opposed to 20 mA for LEDs in a twodimensional array.

The very high LED content in both backlighting architectures leads Steele to estimate that this market will consume 46 billion devices in 2013, a staggering number that will put tremendous pressure on global chip-making capacity. Predicting which LED chipmakers will benefit the most from this explosion is tricky, partly because some TV makers can also manufacture their own chips. In addition, the drive currents are low and sophisticated packaging approaches are not required, so this market is not limited to those manufacturers capable of producing state-of-the-art LEDs. And it is an attractive market to be in, because Steele says that it should offer reasonable profit margins to chip makers and LED packaging firms.

LED-backlit TV manufacturers such as Samsung and LG can produce LEDs in house, and they are looking to increase their internal capacity. Samsung reportedly plans to order 100 MOCVD reactors over the next few years, and LG will add an additional 50.

However, these companies will also use additional sources for LED chips, according to Steele. Samsung currently orders LED chips mainly from Epistar in Taiwan, and also from Formosa Epitaxy and Seoul Semiconductor, all of which are running at full capacity. LG buys chips primarily from Cree, and it may also be placing orders with Seoul Semiconductor. The leading Japanese manufacturers of LED-backlit TVs - Sharp, Sony and Panasonic - do not have any internal LED production, and Steele believes that they are likely to use the domestic supplier Nichia, and possibly the European chipmaker Osram. There are also manufacturers of LED-backlit LCD panels in Taiwan, such as AU Optronics and Chi Mei. Steele says that both of these companies are gearing up to have large internal chip capacities, while buying chips from outside suppliers in the near term.

The LED-based TV is destined for market dominance, but will it enjoy a long reign at the top? Absolutely, says Steele, who can see substantial weaknesses in the alternatives. He expects interest in projection TVs - whether they are based on lasers or LEDs - to decline, and says that plasma TVs are in trouble. Although they offer an excellent picture, they are “energy hogs".

CCFLs are fighting back: they are able to produce a wider color gamut than in the past; prices are coming down; and some CCFL-backlit LCD TV panels have been demonstrated with widths of just 14 mm. However, Steele says these advances are still not enough to prevent the meteoric rise of the LED-backlit TV. CCFLs have already given way to LEDs in laptops, and he believes that there is no reason whatsoever why the same will not happen with TVs.

If he’s right, this is fantastic news for LED chipmakers and all of their associated material and tool suppliers – although the credit crunch is biting very hard, the opportunity for substantial growth is on the horizon, and this business should be a healthy one for many years to come.



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