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CN: Initially, XX Epi Fab projects in China (XX companies): XX operating…
Cross Straight: Sanan + Formosa
Remark: Those capacities are estimated based on the number of reactors shipped per region. We believe that a significant fraction of the reactors shipped to China in 2011 and 2012 have actually not been installed. In addition, about 30% of the capacity installed in China stemmed from foreign based (Taiwan, Korea) companies or JV with Chinese entities.
• During the 2010 investment cycle, most LED makers overestimated the demand potential for large LCDdisplays (…). Combined with the vast number of reactors shipped in China following the subsidies bubble,the market is now in a situation of significant overcapacity which will lead to a 12 month digestion periodwith very low volume of orders for MOCVD equipment makers.
Current MOCVD utilization rate is 68% → Excess capacity will be absorbed by middle of 2014.
• Price erosion is strong since 2010 on all types of packages, despite constant improvement in terms ofperformance (lumen per watt). This is likely to continue as new entrants from China increasingly competewith established vendors to capture market share in general lighting applications, and as rooms forinnovation decrease each year.
• In mature applications like cell phones, this strong price decline affects margins and does not generateadditional volume since the applications are essentially saturated.
TV Applications - Recent TrendsToward Higher Resolution - 4K2K (1/2)
• 4K2K (also called 4K or 4K UHD) is a digital video format representing a resolutionof 3840 pixels × 2160 lines (8.3 megapixels, aspect ratio 16:9).
– “4K“ refers to the horizontal resolution (which are on the order of 4,000 pixels) and theterm “2K” refers to the vertical resolution (which are on the order of 2,000 lines).
– Today’s full HD TVs represent a resolution of 1920 pixels x 1080 lines (nearly megapixels).
• In the 3 past years, developments toward this technology have strongly increasedand accelerate time to market. In 2012, Toshiba, LG and Sony have led the way tocommercialize this technology with products such as the Toshiba’s 55ZL2, the LG's84-inch 84LM960V and the Sony's 84-inch 84X9005. And, in 2013, it seems thatmore products will come from Samsung, Panasonic (…).
– In 4K2K TVs adoption, LCD panel suppliers will play a key role as provider of innovativecost-effective technology solutions. Specifically, they will have to focus on leveragingnew technologies: high-transmittance cell design, high-efficiency backlight units (…). Inthis field, Innolux Corporation seems to be the most aggressive player with thedevelopment of a full line-up of panels in the 39" to 85" range.
• At the moment, such products are high-end models with very high ASP.
– For example, cost of the LG's 84-inch 84LM960V and the Sony's 84” 84X9005 are ~$20,000. In summer 2013, Sony should launch 55” model with ASP starting at ~ $5,000.
• Also, as of today, there is no 4K native content available.
In recent years, TV manufacturers have promoted several technologies to excite consumer interest: 3D TV, Smart TV, OLED TV… In 2013, it seems that it is 4K2K!
LED Package and Chip Surface Trends in TV Applications
• Due to LED performance and backlight design improvements, both the average number of packages andthe total chip surface will keep decreasing.
• However this trend will slow down due to:
– Average display size initially increasing until reaching limit related to the typical size of a living room.
– LED efficiency and brightness reaching a plateau.
– Light guide technology reaching its limit in its ability to evenly spread the light of a decreasing number of LED whileincreasing brightness without hot spots.
TV Applications - Alternative TechnologiesQuantum Dots - Overview (1/2)
• Quantum dots are small semiconductor particles that confine theelectron-hole pair in all spatial dimensions.
Dimension
• 3nm to 12nm diameter. Each dot contains less than 35 pairs ofatoms leading to 100 - 1,000 electrons.
Benefits
• Composition and size can be tuned to absorb and / or emitspecific wavelengths (e.g.: CdSe QD emission can be tunedbetween 500nm and 650nm).
• Narrowband emission improves color saturation and limits re-absorption. Better control of absorption / emission spectra allowsreduction of re-absorption and provides higher system efficiency.
• While penetration rate of LEDs in CHMSL (> XX% - GaAs based LEDs) and in RCL (> XX% - GaAs based LEDs)is ramping up…
– Adoption for RCL and CHMSL will continue to grow due to decrease of LED cost and increase of performance.
• … The technology is still not widely implemented in DRL (~XX% - Sapphire based LEDs) and head lamps (<XX% - Sapphire based LEDs) due to associated cost and / or insufficient performance (compared totraditional technologies).
– Adoption for DRL is still low, but should increase rapidly after some regions like Europe have mandated since 2012that all new small vehicles and light trucks to use DRL in daytime.
– Adoption for head lamps will be limited in the short term due to cost, design, thermal management (…) challengescompared to HID Xenon.
• Today, design and style are the main driver for the integration of LEDs.
While adoption of LEDs for CHMSL and RCL is in progress, current LEDs cost and performance do not match with automakers specifications for DRL and head lamps….
• High Beam Assistant (HBA) is part of what is calledAdvanced Front lighting System (AFS). And several otherAFS features are also under development such as targetlighting (spot light) which give warning in the driver’simmediate line of vision (however it can cause glare topedestrians).
• Advanced Driver Assistance System (ADAS), Full AdaptiveFront Lighting System (FAFLS) and several other featuresare also under development.
• At long term, some manufacturers envision connected carsbased on intelligent lighting systems that couldcommunicate through light signal: Light Fidelity (LiFi)technology.
LED Lighting Value ChainTrends in Profit Distribution - Overview
Based on the model “LED for Display”, standardization should also occur for LEDs used in General Lighting applications inducing manufacturing commoditization and value transfer along the supply
chain.Material /
SubstrateDie / Chip
Packaged
LEDModule
Lamp /
Light
Engine
System /
SolutionLuminaire
• New Asian players (China and Taiwan) have entered the business,
especially for low- and middle-end applications
• Despite commoditization, profit can stay high for high-end applications
• Adding functionality
should increase margins • Add functionality
• New designing of fixtures
and improvement of system
size should increase
margin
• Commoditization of chip manufacturing
• Professionalization of the epitaxy process
has started
1
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od
itiz
ati
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/
Sta
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ard
iza
tio
n
Pro
fit
Dis
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& V
alu
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2
Value go upstream on the value chain
→ To LED module and LED-based lighting products levels
And for LED lighting product manufacturers, new testing processes are mandatories during design, development, industrialization and commercialization phases.
Focus on Road and Street LightingApplication - Highway and Road Lighting
• LED lighting adoption in functional Road Lighting was initially hampered bytechnology limitations in terms of light output. The bulk of the application is inthe range of 150W - 250W in HPS (i.e. between 17,000 lm - 33,000 lm). Onlyrecently have manufacturers started coming up with competitive solutionsthat offer attractive payback (i.e. < 5 years).
• For this reason, LED Road Lighting solutions have mainly been applied toresidential streets and secondary/main roads. Conflict areas (i.e. roadinterchanges, roundabouts) and major highways remain lit with conventionalsolutions, even for new installations: typically 400W - 2000W floodlights, untilLED technology offers economically feasible substitutes.
• Manufacturers foresee higher lumen output solutions being available by 2015,eventually replacing today’s 400W - 600W HPS solutions.
• Equivalences to higher wattages (1,000W - 2,000W HID) are expected by 2018.
Annual Sales of Lamps in Asia (Volume)Split by Technology
Based on global population growth and strong urbanization (mostly in China and India), the volume of the Asian lamp market will grow, accelerated by LED penetration, until 2013 before
• LED-on-Si might be better suited for certain types of LED than others. In addition, the break-even pointand incentives to adopt Silicon substrate can vary widely, depending on each individual LED maker’ssituation:
Highlight:
• A single large CMOS fab could supply worldwide LED demand for years to come. As a result, massiveadoption of LED-on-Si would dramatically change the landscape of the front-end LED industry. It wouldfacilitate the emergence of new or smaller players who currently don’t have access to the capital neededto become major players in the industry, and could also entice vertically integrated LED makers toabandon in-house chip manufacturing.
Chinese LED IndustryGeographical Distribution of Chinese LED Players
Chinese LED industry is distributed through 7 main bases… Each one specialized on a specific level of the supply chain (chip players, packaging players, application players).
Source: Gao Hua Securities Research and SEMI China