Are LED Manufacturers Adding Too Much Capacity?
By Ross Young, SVP, IMS Research
Every quarter, IMS Research personnel in China, Europe, Korea, Taiwan and the USA survey companies representing both the supply side and the demand side of the LED market in order to assess the health and outlook of the LED market. We are tracking:
Historical MOCVD tool installations by LED manufacturer, MOCVD supplier, model number and wafer size
Future MOCVD installations by LED manufacturer, MOCVD supplier, model number and wafer size.
Each LED manufacturers’ wafer capacity, die capacity, yielded die capacity and binned die capacity
Quarterly LED panel shipments by panel manufacturer for TVs, monitors and notebook PCs.
Quarterly number of LEDs per panel and total LED consumption by panel supplier at every size, resolution and refresh rate
Annual shipments and forecasts for all other LED applications
The latest report showed that Q3’10 was another record quarter for GaN LED MOCVD installations with a record 230 merchant tools shipped as shown in Figure 1. Quarterly MOCVD shipments rose for the 6th consecutive quarter, a remarkable achievement.
Figure 1: Merchant GaN LED MOCVD Shipments
The GaN LED MOCVD market was previously a 100-200 unit annual market, but exploded from the 2H’09 on the introduction of the first viable LED TVs and bright forecasts for LED penetration into TVs, monitors and eventually general lighting. We believe the merchant MOCVD market will reach 786 units in 2010, up 245 percent. In 2011, based on LED manufacturer surveys, we see shipments flat at around 790 tools.
Companies began adding capacity for many reasons.
LED manufacturers affiliated with LCD suppliers added capacity to boost their self sufficiency.
Independent LED manufacturers added capacity to boost their market share or enhance their vertical integration efforts.
China introduced a MOCVD stimulus program to boost their LED self sufficiency. This program is expected to result in $1.6B in spending on MOCVD tools from 2010 – 2012. In addition to subsidies worth up to $1.8M per tool, local Chinese governments are also offering lower tax rates, accelerated depreciation and free land. This program has encouraged existing Chinese LED manufacturers to expand capacity, resulted in many new entrants and caused existing players in Taiwan and Korea to form joint ventures and add capacity in China. China led in MOCVD installations for the first time in Q3’10 and is expected to lead until the MOCVD stimulus program ends.
In search of growth, a number of existing semiconductor manufacturers have diversified into LEDs hoping to capture some of the remarkable growth forecasted for this segment.
In total, 25 new LED manufacturers have entered and nearly all of the approximately 75 LED manufacturers are adding capacity between 2009 and 2011.
As a result, we are showing tremendous growth in LED capacity. In 2” wafer equivalents with conservative assumptions regarding tool ramps and utilization in China, we show ramped wafer capacity rising 54 percent in 2010 and 74 percent in 2011. There is also tremendous room for LED manufacturers to improve yields and bin rates, effectively boosting die capacity without additional capacity investments. In fact, a number of the leading manufacturers claim to have boosted yields (including binning) from the low 50s to the high 70s on their most advanced lines. However, it takes time to ramp to these yield rates and the large number of new entrants and new investments will keep industry average yield and bin rates low during this rapid expansion. Thus, we are showing weighted binned die capacity, which accounts for different yields and bin rates at different die sizes, rising 44 percent in 2010 and 60 percent in 2011. We believe these are conservative numbers with weighted average yields in the low 40s in both 2010 and 2011. Interestingly, we show 2012 weighted binned die capacity, without any additional tools installed in 2012, rising 31 percent as new tools ramp and yields and bin rates improve.
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