Sapphire Applications and Market from LED to Consumer Electronics 2014 Report by Yole Developpement

© 2012•1Copyrights © Yole Développement SA. All rights reserved.

Sapphire Market 2014:LED Substrate, Display and Protection

for Consumer Electronics

75 cours Emile Zola, F-69001 Lyon-Villeurbanne, FranceTel : +33 472 83 01 80 - Fax : +33 472 83 01 83

Web: http://www.yole.fr

Growing

→

Core Fabrication

→

Wafer Slicing

→

Lapping

→

Diamond polishing

Chemical-mechanical

planarization

→

Geometry inspection

→

Optical inspection

→

Final cleaning

→

Epitaxy application

Philips LumiledsMonocrystalRubicon AppleGTAT Peregrine Semiconductor

http://www.yole.fr/


Core PricesThe 2009-2013 Cycle

To understand the current pricing environment and try to predict future trends, it is necessary to look back at the previous price cycle:

Initial conditions

TriggerShort Term

EffectMid Term

EffectLong Term

Effect

• Few sapphire makers• World economic crisis

affecting all industries• Most sapphire makers

cash strapped andunable to invest in newcapacity.

Unanticipated[1] and strongdemand jump due tosuccess of first LED TVmodels

• Material shortage

Dramatic material priceincrease (5x)

• High profits forestablished vendorsand new entrants,regardless of coststructure

• Excessive capacityinvestments (also byanticipation of generallighting applicationsgrowth)

• More than 80 newcompanies trying toenter the market

Excess capacity andslower than anticipateddemand triggers pricecrash (8x drop)

Worldwide Economic Crisis

LED TV: strong demand hike

Sapphire Shortage Excess Investment Price crash + long depression

2008 – Early 2009 Q4-2009 2010 2011 2011-2012

[1]: Massive adoption of LED for LCD TV backlight wasn’t anticipated before at least 2010-2011


Sapphire Core and Wafer Revenue Top 20 Companies

Total: US$XXX m

• The top 5 vendors captured 35% of revenue. The top 20 captured 77%.

• The 65 remaining companies shared wafer related revenue of US$XXX m

• However, some of those “2nd tier” are quite successful with non wafer products. We estimate that those “other applications” totaled US$XXX m in 2013.

• PSS foundries entered the top 20 for the first time (Rigidtech, LGS, Aceplux)


Revenue Geographic BreakdownCores and CSS

• The core market is dominated by XXX with 28% of the totalcore revenue in 2013.

• Other leaders are XXX in Taiwan, XXX, XXX and XXX inKorea and Rubicon in the US.

• XXX remains strong in china but faces increasingcompetition from newcomers HTOT and Unionlight. Inaddition, many other material makers in china managed tosell core or blanks into the CE wafer supply chain (XXX,XXX…)

Total:$188m

• The CSS market is dominated by Japan, mostly by sales forits domestic market. Namiki was the #1 worldwide leaderin 2013 while Kyocera dropped after loosing a key accountin Korea.

• Korea is the #2 region, also mostly selling in its domesticmarket. The leaders there are unchanged: Iljin display andHansol Technology.

• XXX and XXX remains the leaders in China but are nowchallenged by Unionlight, XXX and many others.

Total:$361m


Alternative Substrates For LEDOverview

• There are two major candidates: Silicon and GaN. Both aim at displacing sapphire by improving LED cost ofownership (Lumen/$). However the philosophy behind them is different:

– GaN wafers would significantly increase epiwafer manufacturing cost but enhance performance (light emitted by unitof chip surface) to levels that would still improve the Lumen/$ figure over sapphire.

– Silicon would deliver LED performance similar to sapphire but allow significant cost reduction at the die level byenabling manufacturing in existing, fully depreciated 8” CMOS fabs.

COST =

$

LUMEN

Manufacturing Efficiency

• Higher equipment throughput and

yields

• Economy of scale

LED Performance

• Higher efficiency (lumen/W)

• More light per chip (driving current)

GaN-on-Si LEDs→ Reduce component

cost

GaN-on-GaN LEDs→ Improve performance

to reduce number of

packages per System


MR16, Spot A19, Bulbs DownlightTroppher, Linear

fluorescentStreetlight High Bay Decorative

Illustration

Requirements

Small form factor, high density of

light, focused beam

High volumeDirectional beam

patternNA

High flux required,

Controlled beam shape for

roadway lighting

High flux required, controlled beam

shape

Design flexibility

ChallengeThermal

Management

Omni directional

beam pattern, low glare

NAVery large surface,

diffused light, requires low glare

Priority is often to maximize energy efficiency rather than initial cost

Energy efficiency is important for total cost of ownership

Low glow usually

preferred over high flux

Comment

Ideal application for GaN. Currently

no satisfying solutions for 50W MR16

Glare and cost of ownership are limiting

Can also be build with cost efficient

Chip On Board (COB) LEDs

More suited for low/mid power

LEDs

GaN could compete when

initial cost is key

Solutions based on COB or standard power package

already exist

NA

Opportunity for GaN

High Low Medium Low Medium Medium Low

GaN on GaN LEDsPotential applications (General Lighting)

http://www.google.com/url?sa=i&rct=j&q=T8&source=images&cd=&cad=rja&docid=dG0DSMdGqaoYyM&tbnid=otGIEoW_vK0S0M:&ved=&url=http://www.vdeen.com/pcls/List_154_1.html&ei=V4aWUYqcMoLQiwKI14GwBA&bvm=bv.46751780,d.cGE&psig=AFQjCNESUjedwBoMPZtydPncuzAktk5Zew&ust=1368905688131936

http://www.google.com/url?sa=i&rct=j&q=T8&source=images&cd=&cad=rja&docid=dG0DSMdGqaoYyM&tbnid=otGIEoW_vK0S0M:&ved=&url=http://www.vdeen.com/pcls/List_154_1.html&ei=V4aWUYqcMoLQiwKI14GwBA&bvm=bv.46751780,d.cGE&psig=AFQjCNESUjedwBoMPZtydPncuzAktk5Zew&ust=1368905688131936

http://www.google.com/url?sa=i&rct=j&q=street+lighting&source=images&cd=&cad=rja&docid=uKNbcsvyAI4prM&tbnid=hRcP6J-Z1S_BSM:&ved=0CAUQjRw&url=http://www.bwcinc.com/website/ProLITMain.htm&ei=2sWWUYLjBaaSiQKm5oHwCw&bvm=bv.46751780,d.cGE&psig=AFQjCNEFOzgsuv-qNVdHRkc39lni7ecrIA&ust=1368921927712024

http://www.google.com/url?sa=i&rct=j&q=street+lighting&source=images&cd=&cad=rja&docid=uKNbcsvyAI4prM&tbnid=hRcP6J-Z1S_BSM:&ved=0CAUQjRw&url=http://www.bwcinc.com/website/ProLITMain.htm&ei=2sWWUYLjBaaSiQKm5oHwCw&bvm=bv.46751780,d.cGE&psig=AFQjCNEFOzgsuv-qNVdHRkc39lni7ecrIA&ust=1368921927712024


GaN vs. Sapphire:Breakeven Price Analysis

• Simulations were conducted for various 4” GaN wafers price and yield hypothesis in order to estimate thebreakeven point with current sapphire based technology. The reference target point is represented by thecurrent cost efficiency of a Flip Chip die built on a 4” Patterned Sapphire substrate.

• Under those assumption, the breakeven point is <$XXX. We therefore consider that unless the price of 4”GaN wafer reaches this <$XXX target, adoption of GaN on GaN will be restricted to niche markets wherethe specific performance advantages of GaN (high flux over a small surface) overcome the price handicap.

• An engineered substrate behaving like a GaN bulk wafer but offered at <$XXX would rapidly offer significantcost of ownership benefits over sapphire and could capture significant market shares.

4” GaN wafer price

Lu

men

s/

$


LED Makers Positioning

Commitment to Si platformNo interest /

ExitedDefensive Core Strategy

Development status

R&D

Pilot

Ramping Up

Volume Manufacturing

LED makers committed to Si as

differentiating technology

LED startups committed to Si as

differentiating technology

Established LED makers with limited differentiation on sapphire

platform and access to internal CMOS fab

Strong incentive for Si

Established LED makers with strong sapphire-based

technologies and no internal CMOS fab capacity

Established LED makers with strong sapphire-based

technologies and no internal CMOS fab capacity.

Have experimented but ruledout Si in the short/mid term.


Cost SimulationResults

The simulations show a potential cost reduction of -38 to 45% at the die level vs. a 4” sapphire vertical LED:

January 2013

Notes: • Front End = epitaxy + Si carrier preparation + wafer processing + bonding + epi substrate removal• Back End 0 = Probe test + scribing include yield costs (cumulated cost of all the rejected die)


2010-2014 GaN MOCVD Capacity EvolutionGeographic Breakdown (K, CH, JP, TW, US…)

Total MOCVD capacity increased 270% in the last for year, with China taking the lead since 2012.

However, we estimated that only 70% of the reactors present on Chinese soil are operating.

Feb. 2014

Note: based on physical location of the reactors (i.e:reactors at Chinese branches of Taiwan based LEDmakers are counted in China)

Millio

n T

IE

/m

on

th


Wafer Diameter Trends:Geographic Breakdown

Feb. 2014

See comments next page.

Th

ou

san

ds

TIE

/m

on

th


PSS Supply ChainOverview

• The PSS supply chain is highly fragmented with multiple players and products moving along 5 differentpossible channels:

Sapphire Maker PSS Foundry LED Makers

Sapphire Maker with internal PSS capabilities

PSS Foundry

LED Makers

LED Makers with internal PSS CapabilitiesSapphire Maker

Sapphire Maker LED Makers

PSS Foundry

Sapphire Maker LED Makers

1

2

3

4

5

2

1

1

1

2

2

3

1

3

1

Sub-contracting

Sub-contracting


PSS Adoption Trends Volume Breakdown and Adoption Rate per Region

• PSS adoption rates varies by region with China, Korea and Japan leading with more than XX%, followed by Taiwan at XX%.

• US and Europe are trailing at XX% and XX% respectively due to the prevalence of vertical LED structures amongst the local LED makers. However, Philips Lumileds (US) started using small volumes of PSS in 2013.

Total: XXm TIE

per month


PSS Capacity In TaiwanOverview

Note: all capacities in TIE per month

Total Capacity: xxk TIE• Leading foundries are: Rigidtech, XXX, XXX and XXX.• Multiple smaller foundries have emerged during the PSS shortage in 2012. We believe that most could disappear in the next 12-18 months.

Total Volume Processed internally by LED makers: xxk TIE

• XXX is the only Taiwan based LED maker that processes a large fraction of its PSS needs internally.

Total Capacity: xxk TIE• Most sapphire makers are now vertically integrated and have some internal PSS capacity.• Leaders are: Crystalwise, Crystal Applied Technology, Tera Xtal (ACTC), Procrystal.• Following the merger with SAS, Crystalwise is now the largest PSS producer with a total capacity of 350k.• Crystal Applied Technology has been outsourcing PSS to foundry partner XXX but is now setting up in-house capacity in China.

Total: xx m


Evolution of Peregrine Ultra CMOS Technology

STeP8: 250 nm. Bonded on 6” Sapphire

STeP10: 130 nm Epi on 8” eSI-SOI

STeP2: 500 nm. Epi on 6” Sapphire

STeP5: 350 nm. Bonded on 6” Sapphire

STeP3.5: 350nm. Epi on 6” Sapphire

STeP4: 350 nm. Epi on 6” Sapphire

Best commercial GaAs: 224

Technology Scaling

Technology Scaling

Technology Scaling

Technology Scaling+ Substrate

improvement

Technology Scaling

UltraCMOS

6” sapphire & 8” SOI wafers (Peregrine)


Definitions and Metrics for Material CapacityTwo Inch Equivalent

• The TIE metric was a convenient way to gage and compare capacity from one vendor to another. However is not applicable to non wafer products like cell phone display covers and other shapes:

– Square shapes lead to potentially higher utilization rates

– Different orientations possible

• The example below illustrates how for a boule with a given geometry, the potential material usage varies depending on the geometry and orientation of the parts to be extracted.

• We chose to still report capacity in TIE for better comparison with historical data. However, one should keep in mind that a given TIE capacity can lead to different volumes if the company serves non wafer applications.


Material Capacity GrowthTop 20 manufacturers.

• The top 3 remains unchanged and represent 26% of the total capacity.

• The top 20 represent 77%.• There are now 9 Chinese companies

in the top 20.• Procrystal capacity = XXXk in Taiwan

+ XXXk in new facility in China. However, some of the capacity in CN might stem from furnaces transferred from Taiwan.

• The GTAT capacity reported is for the Salem, NH facility. Although, we believe those furnaces are currently essentially used for process development. Capacity at the new Mesa, AZ is NOT included here.


Focus on ChinaOverview

• Since 2009, we’ve tracked a total of 93 companiesactive or planning to enter the sapphire market.

• We believe that at least 10 projects have alreadypulled the plug or stopped before constructionstarted. Among the highest profile where GCLOpto, SKT and Kanglan which initially targeted acombined capacity of more than 2.5 million TIE permonth.

• Most of the new entrants rely on growthtechnologies acquired abroad (GTAT, ARC Energy,Thermal Technology and multiple EasternEuropean Kyropoulos vendors). However there arenow credible equipment manufacturers in China.

• There are more than 80 LED epitaxy companies inChina. More than half of them are likely todisappear within the next 2-3 years. But strongleaders are emerging (Sanan, ETI, Epilight,Yangzhou Zhongke Semiconductor, Nationstar,Tsinghua Tongfang, HC Semitek, Silan Azure..)

Leading Companies:

• Crystaland, Aurora, Silian

• Emerging: Unionlight, HTOT, Saifei,

Shangsheng, TDG Core, NJ-Crystal,

Crystal Optech etc…


Supply vs. Demand:Scenario #2: Adding Display Cover to CE & LED

Note: excludes 80% of Apple need

considered captive at the GTAT Mesa facility


Apple Sapphire Wafer Supply ChainOverview

Material (Cores)

Slicing Polishing Laser Cutting Coating Assembly

XXXXXXXXX

XXXXXXXX

XXXXXXXXXXXX

XXXXXXXXXXX

XXXXXXXX

XXXXXXXXXXXXXX XXXXXXXX

XXX

XXXXXXX

XXXXXXXXXX

XXXXXXXX

30%

70%

Partially vertically

integrated


Smart Watches and Sapphire

• Sapphire has been used in luxury watches since the 1930’s. Todays, most “luxury watches” watches havesapphire windows obtained by the Verneuil method[1].

• However, the Verneuil method is limited in size (1-1.5“ diameter max) and “Smartwatches” have ratherlarge displays. This provides opportunity for non alternative bulk growth technologies to capture thismarket despite their higher cost.

• Some smartwatch models announced at the CES 2014 feature a sapphire display cover. However, thecurrent market leader, Pebble announced it’s new flagship model will use Gorilla Glass.

The Wellnes Watch by Wellograph features a

sapphire display cover (source: company)

Feb. 2014

[1] This market is discussed in details in our “Touch Screens, Displays, Semiconductor, Defense & Consumer Applications of Sapphire” report


Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1-2015 Q2-2015 Q3-2015 Q4-2015

# of furnaces operating(Average over the period)

Monthly furnace capacity

Quarterly output (million pieces)

Total Annual (million pieces)

ASP (US$)

Revenue (US$m)

Finishing yields

Total display covers (Million Units)

Total annual # of display covers

GTAT Mesa Revenue Model

• If all iPhone use sapphire by 2015, output might be insufficient to cover 100% needs.

Might use 2nd supplier (would be reasonable for risk mitigation)

• Due to exclusivity, GTAT opportunities in sapphire outside of Apple will be quite limited.


Unionlight Technology Co. Ltd (CN)元亮科技集团

• Capacity/Capability (Q1-2014)– The company has developed an in-house Kyropoulos-type of growth

technology called TSTGT (Top Seeded Temperature GradientTechnique) that features CZ-like seeding and diameter controlprocedures.

– As of Q4 2013, the company grows 100 kg boule but is currentlyupgrading the technology to 150 kg by mid 2014 and is currentlydeveloping 300kg systems.

• Sapphire Revenue (estimates):– 2012: US $XX million

– 2013: US $XX million

Source: Atlas website

Xinjing Sapphire boules: 18, 35 and 80kg (source: company)

Xinjing Sapphire capacity expansion plan (source: company)


Compound Semiconductors reports from YOLE

UV LED MARKET

LED Packaging

LED Front End Manufacturing Technologies

GaAs Wafer Market & Applications

III-V Epitaxy Substrates &

Equipment Market

Sapphire CoSim+

New!

Sapphire for Electronics, Car,

Defense…

Status of the LED Industry

New!New!

Bulk & freestanding GaN

New!

Diamonds

SiC Market 2013

New!

Graphene


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