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China LED Production Ready for Lift-Off

Chinese government subsidies have encouraged LED manufacturing by heavily subsidizing the costs of MOCVD tools. Aixtron & Veeco remain the leaders with 54% and 44% market shares respectively says IMS Research.

IMS Research’s latest Quarterly LED Supply and Demand Report reveals that while China was the #4 region for LED production in Q3’10 with a 13% share of 2” equivalent wafer capacity, by Q4’11, it will become the #1 region with its capacity share reaching 32% in Q1’12.

China’s impressive share gains are a result of a multi-pronged stimulus program which encourages companies to manufacture LEDs in China by heavily subsidizing the costs of the MOCVD tools, the most critical tool in the manufacturing process, while also offering numerous other benefits.

The share gains have already started with China the #1 region for MOCVD installations for the first time in Q3’10 with a 32% share, up from 18% in Q2’10. China is forecasted to lead in MOCVD installations for at least the next 5 quarters, accounting for 64% of 2011 MOCVD installations.

The Q3’10 merchant MOCVD GaN LED market reached a record high of 230 tools. Revenue growth outpaced unit growth, up 22% Q/Q and 250% Y/Y to $489M.

Aixtron remained the market leader with a 54% share, down from 55%, with Veeco’s share rising from 42% to 44%. On a revenue basis, Veeco’s share rose from 44% to 48% supported by the transition to its K465i tool which was the industry’s top selling model in Q3’10.

LG Innotek installed the most tools in Q3’10 followed by Forepi and Huga. LG is expected to overtake Samsung LED in wafer capacity in Q4’10 with Samsung reclaiming the top spot in Q2’11. In Q3’10, LG led in 2” and 6” capacity with Samsung leading at 4”.

Sanan is expected to install the most tools over the next 5 quarters. 7 different companies are expected to install at least 50 tools over this period with more than 1000 merchant tools installed between Q4’10 and Q4’11.

LED backlighting revenues are expected to peak in 2013 with notebook and mobile phones peaking in 2010.

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