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Could Silicon Substrates Eclipse Sapphire?

Maybe in the LED market. But opportunities for power amplifiers and tuneable capacitors and competing technologies may bring new volume applications to sapphire wafer manufacturers
Significant overcapacity and low LED substrate prices will affect the profitability and viability of many sapphire players in 2013 and beyond, but emerging applications could transform the industry.


According to the latest report by ReportsnReports.com, “Sapphire Substrates 2013", the sapphire material shortage experienced from 2010 to early 2011 created a window of opportunity for new entrants.


In the last two years, more than 80 companies announced their intention to enter the industry, bringing the potential number of players to over 130 with more than 50 of these potential new entrants located in China.


Coupled with slow demand from LED makers in 2012, this has created a very challenging environment with cores and wafers often selling at prices at or below manufacturing cost.


Revenues increased 15 percent in 2011 but are expected to drop 9 percent in 2012 due to lower Average Selling Prices. This will be despite volume increase and a favourableproduct mix with the percentage of PSS wafers increasing dramatically.


These difficult market conditions will trigger an industry rationalisation through consolidation and attrition that should take place in 2013 and 2014; activities that the Yole Finance business unit is monitoring closely.


In the long-term, as the environment remains extremely competitive, it is expected that the industry will evolve towards a more vertically integrated model in order to limit margin stacking. A handful of tier-1 worldwide leaders should emerge from this rationalisation, along with smaller tier-2 regional players.


LED-on-Silicon is a major threat for sapphire makers


All major LED makers are currently exploring opportunities for transitioning from a sapphire-based technology platform to a silicon-based one (“LED-on-silicon"). This interest is driven by a potential cost savings of up to 60 percent at the die level.


But while significant progress has been made, the technology still faces hurdles.


It remains to be seen whether the leading proponents of LED-on-silicon, like Bridgelux/Toshiba and Lattice Power, will be able to tackle all of the remaining challenges and transition to mass manufacturing in a cost-effective manner. Another new player in the market is Plessey Semiconductor who have not yet begun mass production, but this should hopefully come in the next year.


For most other LED companies, LED-on-silicon is often an important development axis, but not a necessary milestone on their manufacturing roadmap. The jury is still out, but in the meantime, investments in the large-diameter sapphire platform are often postponed pending the outcome of LED-on-silicon.


GaN could capture some niche markets thanks to higher performance and competitive system-level cost of ownership.


What's more, the Silicon on Sapphire (SoS) application could represent a nice upside for the happy few that enter the supply chain. Demand more than doubled in 2012 and could well do the same in 2013.


Major SoS company Peregrine has developed an Antenna Switch technology that has already achieved vast success in smart phones. The company benefits from strong macro trends in the cell phone market and is developing new components that could further increase not only SoS content per phone, but also wafer demand.


Opportunities for these new components (Power Amplifiers and tuneable capacitors), as well as for competing technologies developed by companies like Paratek (now part of cell phone maker RIM), may bring new volume applications to sapphire wafer manufacturers.




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