Proliferation of HB LEDs fueling niche markets for equipment suppliers

NEW TRIPOLI, USA: The High Brightness Light Emitting Diode (HB LED) market is expected to explode as unit shipments more than double between 2009 and 2012 according to the report “The Solid State Lighting Revolution: Market Analysis And Insight On Reducing Manufacturing Costs,” recently published by The Information Network.

“The rapid increase in the market for HB LEDs used in various applications such as notebook backlights and automobile headlights is also spurring heavy capital investments by LED makers, noted Dr. Robert Castellano, president of The Information Network. “LEDs are creating a niche market for conventional suppliers of semiconductor processing tools and a lucrative market for MOCVD suppliers.”

Veeco, a leading supplier of MOCVD tools, notes in an investor presentation that a consensus of forecasts from six sell-side analysts forecasts a doubling in MOCVD demand, from 208 tools in 2009 to 415 tools in 2011.

Our analysis indicates that in 2009, each MOCVD tool was capable of processing about 30 million LEDs. In 2011, based on the same throughput, there will be a cumulative supply deficit of 15.5 million LED units, unless MOCVD equipment suppliers increase throughput and yields to reduce CoO.

The US DOE’s Solid State Lighting Manufacturing Roadmap targets a factor of two improvement in cost-of-ownership for manufacturing equipment every five years. If suppliers are successful, enhancements in processing time, uniformity, repeatability, temperature control, and flow geometries will mitigate the supply deficit.

“Clearly it is not within the best interests of MOCVD tool suppliers to improve CoO as it will reduce sales,” added Dr. Castellano. “But competition is the key enabler, which will force suppliers to enhance their tool capabilities.”

The HB LEDs are currently a $5 billion niche market compared to the $250 million semiconductor market. The consensus forecast of 415 MOCVD tools represents a market of greater than $1 billion based on an average selling price of $2.5 million for each MOCVD tool. MOCVD represents 8% of the typical cost breakdown for a packaged LED.

Other front-end tools represent more than 3% of the cost and equates to an additional $500 million market for lithography and metrology tools. The biggest sector, 65 percent, represents back-end processes such as substrate removal, chip separation, and packaging.

The backlight sectors will exhibit the fastest growth in the HB LED market with an overall CAGR of more than 40 percent, led by the LCD TV sector exhibiting a CAGR of 300.3 percent between 2007 and 2012.