China LED Production Surging Ahead

IMS Research’s latest Quarterly LED Supply and Demand Report reveals that while China was ranked fourth for LED production in Q3 2010 with a 13 percent share of 2” equivalent wafer capacity, by Q4 2011 it will become the number one region with its capacity share reaching 32 percent in Q1 2012.

“China’s impressive share gains are a result of a multi-pronged stimulus program which incentivizes companies to manufacture LEDs in China by subsidizing the costs of the most critical tool in the manufacturing process, metal organic chemical vapor deposition (MOCVD), by up to $1.8M per tool while also offering lower tax rates, accelerated depreciation, free land and growing domestic demand,” said Ross Young, IMS Research senior vice president.

The share gains have already started in China for metal organic chemical vapor deposition (MOCVD) installations for the first time in Q3 2010 with a 32 percent share, up from 18 percent in Q2 2010. China is forecasted to lead in MOCVD installations for at least the next 5 quarters, accounting for 64 percent of 2011 MOCVD installations.

China’s surge in LED capacity is coming at a convenient time for LED toolmakers as Korean and Taiwan LED manufacturers are slowing their capacity expansion plans as LED market conditions have temporarily deteriorated on slower than expected LED TV sales. At the same time, some Taiwan and Korean suppliers are shifting their capacity expansion plans to China in order to take advantage of the stimulus program. In fact, while 10 of the top 20 LED manufacturers in Q1 2012 will have production in China, six of these companies will be headquartered outside of China.

Other highlights of the report include:

The Q3 2010 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 2010.

Aixtron and Veeco’s tool shipments are now reconciled with their financials back to Q1 2009 revealing their ASPs each quarter.

LG Innotek installed the most tools in Q3 2010 followed by Forepi and Huga. LG is expected to overtake Samsung LED in wafer capacity in Q4 2010 with Samsung reclaiming the top spot in Q2 2011. In Q3 2010, LG led in 2” and 6” capacity with Samsung leading at 4”.

On an area basis, 2” remained dominant in Q3 2010 with a 77% share and should continue to maintain a dominant share over the forecast period with the China stimulus program designed around 2” tools.

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

IMS Research surveyed LED manufacturers on their planned tool purchases over the next 5 quarters which are revealed in this report. Sanan is expected to install the most tools over the next 5 quarters and has already paid deposits on over 80 systems. 7 different companies are expected to install at least 50 tools over this period with more than 1000 merchant tools installed between Q4 2010 and Q4 2011.

Based on current visibility, 2011 MOCVD shipments and revenues are expected to slightly exceed 2010 results which are expected to be up 245% and 250% respectively.

For more information, visit: www.imsresearch-usa.com