Technical Insight
MOCVD tool makers flounder as LED lighting stalls
A heady mix of Chinese subsidies, disappointing LED lighting sales and near-saturation in back-lighting markets has tipped makers of MOCVD reactors off-kilter. Where next for the equipment manufacturers, asks Compound Semiconductor.
Without a doubt, 2012 has been a turbulent year for manufacturers of MOCVD reactors for LEDs.
Buoyant demand in LED back-lighting for LCD displays, expected increases in general LED lighting sales and hefty Chinese government subsidies, fuelled equipment sales from 2010 to 2011. But then came the crunch.
As Alice Tao, IMS Research analyst puts it: “The back-lighting market is almost saturated, the lighting market has not taken off as most people thought and according to a government announcement I heard, subsidies stopped in the second half of 2011.”
The triple whammy saw MOCVD sales plummet from late 2011, come June this year industry analysts were warning of rocky times ahead and last month Germany-based Aixtron and Veeco, US, posted falling profits, blaming LED markets. Given this course of events, equipment makers are now sitting tight, waiting for excess capacity to clear and the general LED lighting market to finally take-off.
“The adoption of global LED lighting is gaining traction, but we are not yet at a point where LED manufacturers have started to significantly invest in new capacities,” explains Rainer Beccard, vice-president of marketing at Aixtron. “Chinese subsidies created an unnatural equipment demand and excess [capacity] is being absorbed, but the story behind global LED lighting hasn't changed. For us it's a question of when, not if, LED lighting demand will translate into demand for equipment.”
But this is where the future looks very uncertain. When exactly will China's excess equipment capacity be absorbed so MOCVD sales can pick-up?
“China has started issuing initial subsidies to make the price of LED lighting products more attractive, so manufacturing and sales of LED lamps are subsidised rather than the purchase of equipment,” highlights Beccard.
Such a move from local or central Chinese government could boost the adoption rate of LED lighting, and even help to clear an inventory backlog. As Beccard adds: “We've already seen something similar in Japan, post-Fukushima, where public grants and subsidies were put in place for LED lighting.”
New subsidies or not, recent improvements in LED outputs twinned with falling lamp and bulb prices, could kick-start a recovery sooner rather than later. Beccard is banking on “sometime next year”, while IMS analyst Tao, believes capacity will be cleared a little later.
“We think that LED lighting applications will really take off in 2014 and there will be good opportunities for equipment suppliers from 2014 to 2016,” she says.
However, Tao believes some companies will fare better than others. “Veeco's global market share has now exceeded Aixtron's, mostly due to the China market,” she points out. “We've asked LED makers why they choose a certain tool, and according to them, Veeco's tools are easier to run. China-based businesses tend to have less experienced technical staff, so most new entries here go for Veeco.”
But developing the preferred tool or not, the future looks healthy for all makers of MOCVD equipment. Come 2014, Tao asserts LED lamps will make up a hefty 66% of the lighting market as incandescent and fluorescent lights fade away. Surely this bodes well for reactor sales over the coming years?
As Beccard says: “We are not completely relaxed about the downturn but we know it's not a disaster. This is all about managing it. Its intensity and length is a bit different from what we have seen before but we know the prospects are there for things to get better.”
When will sales of MOCVD equipment, such as AIXTRON’s Planetary Reactor, gather pace?
