Rocketing LED Manufacture Spurs AkzoNobel’s Metalorganics Division
Q: The end of 2008 was a really tough time for substrate suppliers. Did your experience echo theirs?
A: Our business was running strongly in 2008 until it fell off a cliff in mid-November. In the month after we felt the impact of low operating rates at many of our customers. They keep quite significant stocks of our products, and decided to live off this before re-ordering. We had to quickly reduce costs wherever possible. One of our advantages is that we produce our metal-organic sources at a large plant in Texas, near Houston, and this is shared with our larger metalorganic manufacturing organization that sells metal alkyls to the polymer and pharmaceutical industries. That business suffered much less than ours, and we shared resources and reduced our cost base temporarily.
In the crisis - which lasted well into at least the second quarter of 2009 - we used the time to refocus on our own technology and manufacturing, and made good progress to start preparing for the growth that would come as the industry picked up.
Q: How have sales from the high-purity metalorganics (HPMO) division fared since then?
A: We saw extremely slow demand in the first quarter, but visibility recovered by the end of this period. Then orders came in, and we started shipping products again, but this was quite well into the second quarter 2009. The first signs of recovery, as always, were in Asia, and we started shipping products to them in May. I think it’s remarkable how the LED industry has turned itself around. We talked to our customers in the first quarter - many were working part time, having reductions in labor force, and so on, and capacity was down in the 30-40 percent utilization level. Now most of our customers are buying new machines, and we’ve worked hard to get our share on the new tools. What we feel – based on what our customers tell us and what we hear from the tool vendors, Aixtron and Veeco – is that this trend will continue well into 2010 and very likely beyond.
Q: Are sales to LED chipmakers a big part of your business?
A: Yes, LEDs are by far the biggest market globally for any player in this industry. The other important markets for AkzoNobel are III-V solar cells, certain laser technologies, and a broader customer base of various device types.
Q: Do you expect the company’s metalorganics business to continue to thrive?
A: I’m pretty excited about the outlook for the next few years. Strong demand in the backlit LED sector will continue. When the technology eventually reaches maturity and the market reaches saturation level, demand might level off again, but that is at least several years away because these technologies are still new. Products for netbook and laptop PCs are where the penetration is greatest, but these portable devices have a lot of potential for further growth. LED TVs are just beginning, and by the time the backlit sector has matured, the general lighting market will be much closer than it currently is. This will provide longer-term growth.
Q: Are there local competitors to your metalorganic business in Asia, which are invisible on a global scale? And if they do exist, do they take a large chunk of their domestic markets?
A: There are several local competitors in Japan, and there is also one Chinese competitor. Japan is a large market for LED production, and laser production is also very significant there. So they have, to an extent, a local supply of MO sources from their own companies.
We compete with these companies on a local basis. The way that we do this is to leverage our strengths from the manufacturing technologies that we have, and the scale of our operations.
Q: Metal-organic suppliers are sandwiched between chipmakers demanding steadily falling prices, and a fluctuating materials market. How do you cope?
A: We are, in a way, squeezed between what our raw material suppliers demand and what our chipmakers can afford, and the chip market is highly competitive with prices falling. However, as a chemical producer we have to strive for having a financial return that enables us to keep investing in the product line and keep extending our large bubbler fleet, so that we can support the future growth of customers and the industry. We need a certain return to keep our business viable.
Of course, the market demands high-quality, reliable products at competitive pricing to support growth in the LED industry. So what we’ve been doing over the past few years – and are still doing – is trying as aggressively as possible to control all our costs. But at some point you reach an asymptote, where not much can be squeezed out of the system any more. So the bottom line is that if our raw material costs increase - and the raw material costs are not an insignificant part of our total costs - then that needs to be reflected in the pricing of our products. This is not always easy, of course.
Q: Some researchers have written papers that claim that the reserves of some metals, such as gallium and indium, will be depleted within a few years. What’s your view on this?
A: We are not as worried as the authors of the papers. We have looked at this at a corporate level, where we monitor all the key raw materials, and in the MO business, we approach this by working as closely as possible with our suppliers.
In the overall consumption of gallium and indium, the production of MO sources is a very small segment. This doesn’t say anything about future capacity, but we are an almost insignificant part of total consumption. Take indium, for example. One of its largest uses is as a precursor for indium tin oxide layers in thin-film panels.
There are future uses of these chemicals that could have an impact, such as some of the solar technologies that are based on gallium and indium, and that could put pressure on the supply chain. We don’t see that right now, but it’s an area that we continue to watch very closely.
Q: What’s your take on the terrestrial solar market?
A: I think the terrestrial III-V solar cell market is real - there have been several projects underway, for example in Spain and Australia. This sector has continued to grow through the deepest part of the economic crisis, but it has been affected by difficulties to get financing. There are some delays in these projects, so momentum needs to be regained. What I see going forward is that IIIV terrestrial will have its spot among the other solar cell technologies, and as it advances, it will need to compete on a cost per Watt basis with them.
Over the past couple of years competing technologies have developed that are based on traditional silicon solar cells – where we are not particularly active – and in thin films, which is basically glass that is coated with either an active layer of CIGS (copper indium gallium selenide), micro-crystalline silicon or amorphous silicon. This is an area of growth for us.
These panels always require conductive oxide layers that should be transparent to light - the so-called TCO-layer - and one of the technologies that can be used for this is based on zinc oxide. This can be applied by sputtering.
However, it is better to use an MOCVD process based on diethyl-zinc, because this gives a superior layer structure, particularly in the scattering of light into the active layer. We have become a major supplier of high purity “DEZn TCO" to this industry, which can use up to 20 tonnes per customer per year. That’s a challenge. They want semiconductor-grade quality at bulk chemical pricing.
Q: So are III-V chipmakers still your largest business?
A: Right now they are, but the thin-film solar industry is about to take off. Many of these customers are in a ramp-up phase, and it will quite soon overtake the MO-III segment. It doesn’t mean that we will neglect the MO-III part of the business – it is still very important, and there are technology synergies in the way we service both markets.
Q: Silicon chipmakers are now looking to other materials to maintain the march of Moore’s Law. Is this a market for you?
A: We reassessed our business strategy in the middle of 2008, and we decided to focus on MO-III sources and dopants for the III-V industry, as well as DEZn for thin-film solar. We produce titanium, hafnium and zirconium metallocene-type chemicals in a plant in The Netherlands, but we have decided to not actively pursue the silicon market.
Q: Environmental awareness of chemical pollution is greater than ever before. Does this affect the way you go about your business?
A: AkzoNobel’s approach is that sustainability offers us a business case to discriminate ourselves. At the corporate level this is getting significant attention. More specifically, in the HPMO business, our major impact on the environment is in the way in which we produce these chemicals. We see that there are actual benefits from producing these chemicals in the larger scale metal-alkyls production environment. We can maximize production synergies there, and we are well integrated with the raw materials, which is always efficient from an environmental point of view. We are also connected to the grid in the plant that provides pollution prevention and recycling systems.
Q: Replacing an empty metalorganic source with a fresh one is a potentially dangerous activity. Are you working to reduce the chances of this process leading to a potentially lethal accident?
A: Safety has always been AkzoNobel’s number one priority and this is not about to change. We set firm targets for all of our businesses and continuously audit our operations. In the HPMO area we try to do as much safety education and training as possible on a one-on-one basis with our customers. We had a program to investigate which type of glove is most resistant to small droplets of MO sources. We found that leather gloves are by far the best to wear, which was not the industry practice. They provide chemical resistivity and thermal insulation.
What I feel myself, coming from my earlier jobs in AkzoNobel’s bulk metal alkyl side of the business, is that in this industry we still have a way to go in recognizing the hazards of these chemicals. To some extent clean room practices that are important for dust control conflict with what you would like to see from a metal alkyl safety perspective. If we transfer metal alkyls at our plant, we wear aluminized suits. This may seem overdone, but it is the only thing that really protects you against leakages. Of course, we handle larger amounts, but this practice hasn’t really progressed into that of our users.
Q: There seems a trend towards the production of larger and larger bubblers. Do you agree?
A: That is absolutely true. What we’ve been doing quite actively over the last few years is to develop several larger style bubblers. We introduced a 7.3 Kg TMGa (Trimethyl Gallium) bubbler four or five years ago, which is offered with a heat exchanger that can be put in the existing cabinet of the tool. That bubbler brought us quite a lot of success.
We have now taken this one step further with the recent introduction of a 20 Kg bubbler. This can be used either in a central delivery set up, or directly in the tool, so we also adapted our heat-exchanger to fit this larger bubbler. As the bubbler gets bigger, it gets harder to fit it into the cabinet. But we are working with a company called Noah Precision, which offers advanced thermo-electric chillers. They have a very small footprint, they avoid the use of the traditional open water baths, and they deliver very good temperature control with low maintenance. What we try and do with our new, larger-scale bubblers, is to offer the option that our customer buys it with a customized chiller. This enables them to put even larger bubblers in the cabinet.
There is also a growing interest in bulk central delivery systems, particularly in new fabs. We are able to offer such systems to our customers, building on our experience with bulk delivery of DEZn TCO.
Q: What do else your customers want from you?
A: If we focus on the LED sector, then our customers want to grow their LED business, which operates in a competitive environment. They need a very reliable supply of the MO sources, and quality consistency is also important. We believe that our relatively large batch sizes help in providing relatively good quality consistency. In the end, pricing is always high on the agenda, and our major task is to keep supplying these chemicals at competitive prices. However, we also keep investing in bubbler innovations. We have the Hiperquad and Hiperloop systems for TMIn (Trimethyl Indium) delivery, that have a very stable flow and very high source utilization.
Typically, the TMIn flow drops off after 80 percent consumption. With these systems - which can increase the contact time between the carrier gas and the TMIn - the bubbler can be used up to 98 percent, and only then does it drop off. In that range we now offer two bigger sizes: 750g and 1500g.
An addition is a Hiperflo bubbler, a liquid bubbler technology that builds on the TMIn bubbler technology. We enhance the flow out of the bubbler, so it gives higher source utilization, and it allows faster growth, which is especially evident in lower vapor pressure sources like TEGa (Triethyl Gallium).