Technical Insight
Emerging markets to save sapphire substrates?
As sapphire substrate makers brace for a year of consolidation, 2013 could deliver the killer application, reports Compound Semiconductor.
Will 2013 be a year of two halves for manufacturers of sapphire substrates? Overcapacity and falling substrates prices look set to trigger industry consolidation but emerging applications, including RF antenna switches and even smartphone display covers, could soften the blow.
“Right now it is very difficult for sapphire substrate makers to be profitable,” says Eric Virey, senior analyst for LED devices and materials at Yole Développement. “In the last couple of years we've seen lots of new entrants in the market. Demand for substrates has been increasing, but not as fast as capacity, so now prices are fairly low.”
As Virey points out, two inch wafer prices have reached rock bottom while prices have also plummeted for four inch wafers. “It's still possible to make money on six inch wafers, but competition is increasing and market prices are also coming down; in most cases prices will be below $200 per wafer,” he adds.
Slow substrate demand from LED manufacturers has also intensified market competition, and now, industry attrition and consolidation looks set to be the only way forward. Virey expects new entrants from China,Taiwan and Korea will fall first. As he points out, around two years ago these players were quick to adopt turnkey crystal growth equipment developed by Eastern Europe manufacturers, despite having little if any experience of growing crystals.
“[Turnkey] equipment can produce high quality crystals, but still has a learning curve,” he says. “I've heard horror stories of companies getting very low yields... certainly a lot of early adopters in Taiwan and Korea struggled before getting yields right. So a lot of newcomers may disappear even before selling a single wafer.”
Virey also suspects more successful players will consolidate, despite qualifying crystals and ramping up production with a reasonable cost-structure. For example, Taiwanese wafer maker Sino-American Silicon Products (SAS) has already merged its sapphire substrate unit with Crystalwise Technology, and more of the same is expected from Taiwan as well as China and Korea.
But while sapphire substrate makers from the West watch events in the East unfold, surely all are scrutinising what the LED industry will do next. Today, more than 80% of LEDs are fabricated on sapphire substrates, but as LED manufacturers push the industry to produce eight inch wafers and beyond, many are also eyeing silicon substrates with a view to fabricating LEDs on depreciated CMOS equipment and slashing manufacturing costs.
“I would say that pretty much every single tier one LED maker is carrying out research and development into GaN on silicon, they simply can't afford not to look at it,” says Virey. “But this doesn't mean they have put silicon on their roadmaps.”
With manufacturing yields for GaN on silicon still a challenge, an industry transition to silicon doesn't yet make economical sense, and as Virey adds: “I'm also not expecting any impact from GaN on GaN in the short term... the price of substrates also needs to come down a little bit.”
However, as Virey is eager to point out, there is more to sapphire substrate manufacturing than LEDs. US-based Peregrine Semiconductor has already achieved vast success with its sapphire-based antenna switches. The company has shipped more than one billion silicon-on-sapphire RF switches, which have been have been designed into some of the most well-known smartphones, including the iPhone 4S.
But while the company is now developing sapphire-based power amplifiers and tunable RF filters, which can only bode well for substrate makers, the best may be yet to come. The last year has seen a lot of excitement over the possible use of sapphire as a replacement for cover glass in mobile phones. Prototypes are reported to exist and if these reach the market place, the impact on the industry will be profound.
In 2012, the smartphone market reached nearly 0.9 billion units. Given a typical smartphone size of 65 sq.cm, nearly 59 billion sq.cm of glass would have been used in smartphones in that year alone. If you take into account that in the same year the LED industry consumed a much smaller 970 million sq.cm of sapphire, the impact of a switch from glass to sapphire is clear.
As Virey puts it: “Even a 5% adoption of sapphire in smartphone displays would have manufacturers demanding much larger volumes of sapphire than LED manufacturers. It's too early to say what will happen, but I strongly believe by the end of this year we will start seeing some smartphone models using sapphire.”
As sapphire substrate makers struggle with excess capacity, will the Smartphone manufacturer offer a way out?
“Right now it is very difficult for sapphire substrate makers to be profitable,” says Eric Virey, senior analyst for LED devices and materials at Yole Développement. “In the last couple of years we've seen lots of new entrants in the market. Demand for substrates has been increasing, but not as fast as capacity, so now prices are fairly low.”
As Virey points out, two inch wafer prices have reached rock bottom while prices have also plummeted for four inch wafers. “It's still possible to make money on six inch wafers, but competition is increasing and market prices are also coming down; in most cases prices will be below $200 per wafer,” he adds.
Slow substrate demand from LED manufacturers has also intensified market competition, and now, industry attrition and consolidation looks set to be the only way forward. Virey expects new entrants from China,Taiwan and Korea will fall first. As he points out, around two years ago these players were quick to adopt turnkey crystal growth equipment developed by Eastern Europe manufacturers, despite having little if any experience of growing crystals.
“[Turnkey] equipment can produce high quality crystals, but still has a learning curve,” he says. “I've heard horror stories of companies getting very low yields... certainly a lot of early adopters in Taiwan and Korea struggled before getting yields right. So a lot of newcomers may disappear even before selling a single wafer.”
Virey also suspects more successful players will consolidate, despite qualifying crystals and ramping up production with a reasonable cost-structure. For example, Taiwanese wafer maker Sino-American Silicon Products (SAS) has already merged its sapphire substrate unit with Crystalwise Technology, and more of the same is expected from Taiwan as well as China and Korea.
But while sapphire substrate makers from the West watch events in the East unfold, surely all are scrutinising what the LED industry will do next. Today, more than 80% of LEDs are fabricated on sapphire substrates, but as LED manufacturers push the industry to produce eight inch wafers and beyond, many are also eyeing silicon substrates with a view to fabricating LEDs on depreciated CMOS equipment and slashing manufacturing costs.
“I would say that pretty much every single tier one LED maker is carrying out research and development into GaN on silicon, they simply can't afford not to look at it,” says Virey. “But this doesn't mean they have put silicon on their roadmaps.”
With manufacturing yields for GaN on silicon still a challenge, an industry transition to silicon doesn't yet make economical sense, and as Virey adds: “I'm also not expecting any impact from GaN on GaN in the short term... the price of substrates also needs to come down a little bit.”
However, as Virey is eager to point out, there is more to sapphire substrate manufacturing than LEDs. US-based Peregrine Semiconductor has already achieved vast success with its sapphire-based antenna switches. The company has shipped more than one billion silicon-on-sapphire RF switches, which have been have been designed into some of the most well-known smartphones, including the iPhone 4S.
But while the company is now developing sapphire-based power amplifiers and tunable RF filters, which can only bode well for substrate makers, the best may be yet to come. The last year has seen a lot of excitement over the possible use of sapphire as a replacement for cover glass in mobile phones. Prototypes are reported to exist and if these reach the market place, the impact on the industry will be profound.
In 2012, the smartphone market reached nearly 0.9 billion units. Given a typical smartphone size of 65 sq.cm, nearly 59 billion sq.cm of glass would have been used in smartphones in that year alone. If you take into account that in the same year the LED industry consumed a much smaller 970 million sq.cm of sapphire, the impact of a switch from glass to sapphire is clear.
As Virey puts it: “Even a 5% adoption of sapphire in smartphone displays would have manufacturers demanding much larger volumes of sapphire than LED manufacturers. It's too early to say what will happen, but I strongly believe by the end of this year we will start seeing some smartphone models using sapphire.”
As sapphire substrate makers struggle with excess capacity, will the Smartphone manufacturer offer a way out?
