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The LED explosion could go up in smoke for some

Strategy Analytics report ,“ Materials Shortage to Restrict Rampant LED Market ”, says consumables and MOCVD equipment manufacturers will struggle to meet demands.

The market for high-brightness LEDs in LCD TV backlights will be restricted by a shortage of key semiconductor materials in the second half of 2010.

With demand for TMG already exceeding the supply, manufacturers will need to absorb a 20% price increase in the near term. A shortage of sapphire wafers is also likely in the second half of 2010.

The report outlines the challenges facing LED manufacturers in 2010, as supply constraints and increasing material prices serve to restrict the rapid market expansion.

“Concerns have previously been raised over the ability of MOCVD equipment vendors to meet rapidly increasing demand,” noted Asif Anwar, Director of the GaAs and Compound Semiconductor Service at Strategy Analytics. “The concern for short supply of materials will create a bottleneck for LED market growth over the short term.”

Taiwanese LED manufacturers in particular need to adjust to the new reality of the supply chain. Historically, they have bargained for the price of these key materials.

But the balance of power in the LED industry has changed.

With competitors backed by massive corporations, such as Samsung and LG, these firms are much better positioned to absorb higher material costs and to guarantee their supply in a constrained market.

Steven Entwistle, VP of the Strategy Analytics Strategic Technologies Practice, added, “Capacity expansions already in progress should relieve these constraints by mid-2011. Until then, the average selling price of high-brightness LEDs based on GaN should hold up well.”

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