Sapphire Substrates 2013

Excess capacity to trigger massive consolidation and attrition.
Will cell phone windows come to the rescue?

Significant overcapacity and low LED substrate prices will affect the profitability and viability of many sapphire players in 2013 and beyond, but emerging applications could transform the industry.
The sapphire material shortage experienced from 2010 to early 2011 created a window of opportunity for new entrants. In the last two years, more than 80 companies announced their intention to enter the industry, bringing the potential number of players to 130+ -- with more than 50 of these potential new entrants located in China. Coupled with slow demand from LED makers in 2012, this has created a very challenging environment with cores and wafers often selling at prices at or below manufacturing cost.  Revenues increased 15% in 2011 but are expected to drop 9% in 2012 due to lower Average Selling Prices, despite volume increase and a favorable product mix with the percentage of PSS wafers increasing dramatically. These difficult market conditions will trigger an industry rationalization through consolidation and attrition that should take place in 2013 and 2014; activities that the Yole Finance business unit is monitoring closely. In the long-term, as the environment remains extremely competitive, we expect the industry to evolve toward a more vertically integrated model in order to limit margin stacking. A handful of tier-1 worldwide leaders should emerge from this rationalization, along with smaller tier-2 regional players.

This report presents historical and future price trends for material and finished wafers, as well as a detailed supply/demand analysis. Volume forecasts are presented for material, standard and PSS wafers, along with a revenue forecast for finished wafers.

LED-on-Si:  a looming threat for sapphire makers
All major LED makers are currently exploring opportunities for transitioning from a sapphire-based technology platform to a silicon-based one (“LED-on-Si”); this interest is driven by a potential cost savings of up to 60% at the die level. But while significant progress has been made, the technology still faces hurdles, and it remains to be seen whether the leading proponents of LED-on-Si, like Bridgelux/Toshiba and Lattice Power, will be able to tackle all of the remaining challenges and transition to mass manufacturing in a cost-effective manner. For most other LED companies, LED-on-Si is often an important development axis, but not a necessary milestone on their manufacturing roadmap. The jury is still out, but in the meantime, investments in the large-diameter sapphire platform are often postponed pending the outcome of LED-on-Si.

This report presents an in-depth analysis of the requisite conditions for the success of LED-on-Si, and reveals how GaN could capture some niche markets thanks to higher performance and competitive system-level cost of ownership.

SoS to provide welcome upsides, but could cell phone windows be the next killer application?
The Silicon on Sapphire (SoS) application could represent a nice upside for the happy few that enter the supply chain. Demand more than doubled in 2012 and could do the same in 2013. Leading SoS company Peregrine has developed a compelling Antenna Switch technology that has already achieved vast success in smart phones. The company benefits from strong macro trends in the cell phone market and is developing new components that could further increase not only SoS content per phone, but also wafer demand. Opportunities for these new components (Power Amplifiers and tunable capacitors), as well as for competing technologies developed by companies like Paratek (now part of cell phone maker RIM), may bring new volume applications to sapphire wafer manufacturers.

The significant capability and capacity build-up and dramatic cost reduction achieved by the sapphire industry in the last three years could open the door for a whole new range of applications. Amongst these, the use of sapphire for small display covers has the potential to be a game-changer and raise the sapphire industry to a completely new level. Despite significant hurdles in terms of cost and manufacturing technologies, all major cell phone OEMs are currently investigating this option. While mass adoption remains uncertain, it is not completely unrealistic -- and due to the current dire situation of their LED-related business, most sapphire makers are eager to help it materialize.

This report analyzes the most recent trends and potential SoS-related upsides, and provides a revenue forecast. Also, the pros and cons of using sapphire in cell phone cover applications are discussed, and various scenarios are presented to illustrate the potential impact in terms of global sapphire demand.

Key report features
This report provides a detailed analysis of the sapphire industry, including revenue, volume and price trends for all major substrate applications. It also includes an extensive list of manufacturers with current and planned capacity, and an analysis of established and emerging manufacturing technologies. The drivers and dynamics of the LED and SoS markets are analyzed, and a preliminary view and plausible scenario are provided on emerging non-substrate applications in cell phones.

Companies mentioned in this report (sample exceeds 170)
Sapphire makers: 
Alpha Crystal Technology, Aurora Sapphire,  BIEMT, Changzhi Hongyua, Crystaland, Technology Crystal, Crystal Applied Technology, DJ laser, DK Astec, ECEC, GCL/GAPSS , GTAT, Haotian Optoelectronics Technology, Heifei Crystalbridge, Hyperion, Iljin Display, Jeshine, Jiaozuo City Crystal Photoelectric, KCC, Kyocera, Monocrystal, Namiki, NCB Network, NGC China Transmission, OCI, Procrystal, Rubicon, Saifei, Saint-Gobain, San Chih Semiconductor, Sapphire Technology, SAS, Shinkosha, Silian, SSLM, LG-Siltron LG, Sumitomo Metal Mining, Tera Xtal, Trinity Material, Union Light Technology, USI Opto, Wafer Works and others

Equipment Makers: 
Apeks, Arc energy, Crystal Tech, Dai Ichi Giken, Ezan, Fukuda Lab, Greenmore, GTAT,  Juropol, Meyer Burger, OK Sapphire, Omega, Pryroda Engineering, Strasbaugh, Tech Sapphire, Thermal Technology, United Crystal and others

Table of contents p2 
Glossary p3
Executive Summary p4
What we Saw, What we Missed     p5
2008-2017 Sapphire Substrate Market Forecast   p6
Major Industry Trends       p7
Key Points for 2013       p14

1 - Industry Overview       p15

• Introduction
• Sapphire Properties
• Main Applications 
• Sapphire Characteristics by Application 
• Sapphire Players: Geographic Breakdown
• Sapphire Wafer Manufacturing Process
• Substrate Value Chain
• 2011 & 2012 (F) Substrate Revenue by Vendor
• 2011 Revenue Bridge
• 2011 Revenue Fluxes
• 2011 & 2012 Geographic Revenue Breakdown
• 2011 Product and Geographic Breakdown
• Sapphire Substrates Price Trends:  Overview 
• 2004-2013 Core Prices 
• Simulated Cost Structure for 4” Cores 
• Impact of Yields on 6” Core Cost 
• Impact of Product Mix 
• Core Extraction: Examples 
• 2005-2013 Wafer Price Trends 
• Long Term Wafer Price Trends Through 2017 
• PSS Price Trends 
• Industry Trends to watch for in 2013 

2 - Sapphire Substrates for Nitride LED     p38
A: LED Market Overview      p39

• Executive Summary       
• Introduction to HB LEDs      
• GaN LED Chip Design Overview      
• Manufacturing Process Overview    
• LED Applications       
• High Brightness LEDs Segmentation     
• Current and Long-Term LED Adoption Trends   
• 2008-2020 Packaged LED Revenue Forecast by Application 
• Evolution of Lamp Consumption     
• 2008-2020 Packaged LED Die Surface Forecast by Application  
• Recent Trends        
• Packaged LED Price Trends     

B: Nitride LED Manufacturing Capacity    p54

• Executive Summary       
• Nitride MOCVD Reactor Capacity     
• MOCVD Capacity vs. Demand      
• Q4-2012 Sapphire Consumption per Region    

C: Volume and Revenue Forecast     p59

• Executive Summary       
• Benefits of Large-Diameter Wafers     
• Challenges for Large-Diameters      
• 2008-2017 Sapphire Diameter Trends     
• Wafer Size: What Happened in 2012?     
• Wafer Size: 2013 Trends      
• 8” or not 8”?        
• Sapphire Forecast: Methodology     
• 2008-2017 LED Wafer Volume Forecast     
• 2008-2017 LED Core Volume Forecast     
• Long-Term Evolution Through 2020     
• 2008-2020 LED Wafer Revenue Forecast    
• Potential Downside:  Substrate Re-claiming    

3-Sapphire Substrates for RF Applications: SOS and BST  p73

• Executive Summary       
• Latest News from the SoS Industry     
• Introduction to SoS Technology      
• SoS via Epitaxy        
• SoS via Bonding + Smart Cut      
• Comparison of Architecture: Si CMOS vs. SoS Ultra CMOS®  
• Smart Phone Shipment Forecast     
• Handset Front-End Module: Overview     
• Comparison of Switch Technologies     
• Size Comparison of Antenna Switch    
• 2005-2012 Peregrine Shipments and Revenue    
• Growth Drivers: Macro-Trends      
• Growth Drivers: SoS Content per Phone
• Growth Drivers: Tunable Radio Modules 
• Ultra CMOS Technology Trends      
• SoS Supply Chain       
• SoS Substrates Characteristics      
• SoS Wafer Supply       
• 2008-2017 SOS Wafer Forecast (Revenue and Volumes)  
• Paratek BST Components      

4-Worldwide Sapphire Capacity Analysis    p95

• Executive Summary       
• Metrics        
• Impact of Large-Diameters      
• Crystal Growth Strategies for Large-Diameters    
• 2012 and 2013 Material Capacity Analysis    
• Material Capacity: Geographic Breakdown   
• Material Capacity: Top 20 Vendors     
• Wafer Capacity: Geographic Breakdown    
• Wafer Capacity: Top 20 Vendors     
• Zoom on Korea        
• Capacity per Vendor in Korea      
• Zoom on Taiwan       
• Capacity per Vendor in Taiwan      
• Zoom on China        
• Capacity per Vendor in China      
• Zoom on Japan        
• Capacity per Vendor in Japan      
• Zoom on Europe       
• Capacity per Vendor in Europe      
• Zoom on North America      
• Capacity per Vendor in North America  

5 – Patterned Sapphire Substrates (PSS)    p128

• Executive Summary       
• PSS Benefits:  Light Extraction      
• PSS Benefits:  Internal Quantum Efficiency    
• When Are PSS Used?       
• Examples        
• Pattern Designs       
• Examples        
• Nano-PSS        
• Random PSS        
• PSS Business Models       
• PSS Capacity Breakdown      
• Overview of PSS Foundries     
• PSS Adoption Trends       
• Adoption Rate per Region and Diameter    
• 2008-2017 PSS Volume Forecast     
• 2008-2017 PSS Revenue Forecast     
• PSS Manufacturing Process      
• Lithography Technology for PSS      
• Emerging Lithography Technology for PSS    
• Wafer Requirements for PSS      
• PSS Metrology       

6 - Sapphire Manufacturing Equipment    p151

• Executive Summary       
• Core & Wafer Extraction     
• Material Defects       
• Material Quality       
• Geometric Yield       
• Process Yield       
• Overall Yield        
• Sapphire Growth Methods: Overview & Main Characteristics  
• Kyropoulos        
• Czochralski        
• HEM         
• VHGF         
• CHES         
• EFG         
• Other Growth Methods      
• Growth Equipment Manufacturers: Introduction   
• Growth Equipment Manufacturers: Overview    
• Growth Equipment Manufacturers by Technology   
• Growth Equipment Manufacturer Trends   
• Installed Growth Capacity per Technology: Q4-2012   
• Slicing and Finishing Equipment     

7 - Alternative to Sapphire for LED Applications   p184

• Executive Summary       
• LED-on-Silicon: Overview      
• LED-on-Silicon: Cost Aspects      
• Potential Benefits      
• Main Challenges      
• TEC Mismatch        
• How to Grow LED structures on Si?     
• Other Challenges for LED-on-Si     
• Conditions for Success #1: Performance     
• Conditions for Success #2: Manufacturing Yields   
• Conditions for Success #3: CMOS Compatibility    
• Conditions for Success: Summary     
• LED-on-Si: Major Players      
• LED-on-GaN: Benefits       
• LED-on-GaN: Substrate Availability     
• LED-on-GaN: Cost Comparison      
• LED-on-GaN vs. LED-on-Si      
• LED-on-GaN: Status       

8 – Non-Substrate Sapphire Applications   p210

• Executive Summary       
• Overview of Non-Electronic Applications   
• Handheld Device Applications      
• Why Sapphire?        
• Sapphire for Cell Phones: Status     
• The Case for Sapphire Display Covers     
• Camera Lens Cover Opportunity: 2012-2017 Scenario  
• Display Cover Opportunity: 2012-2017 Scenario   
• Exfoliation: a Potential Enabler?     

9 - Company Profiles: Established Vendors    p222

• Crystal Applied Technology Inc. (TW)    
• Crystal Wise (TW)      
• Sino American Silicon (TW)      
• Crystaland (CN)        
• GT Advanced Technologies (US)      
• Hansol Technics       
• ILJIN Display        
• Kyocera        
• Monocrystal PLC       
• Namiki         
• Procrystal Technologies      
• Rubicon Technology       
• Sapphire Technology (KR)      
• Silian Optoelectronics (CN)     
• Sumitomo Metal Mining (JP)      
• Tera Xtal Technology       
• USI Optronics Corporation      

10 - Company Profiles: Emerging Vendors    p259

• GCL OptoElectronic (CN)
• Haotian Optoelectronic Technology (CN)
• Hyperion Geocrystal (CN)      
• Jeshine New Materials (CN)      
• OCI (KR)        
• Saifei Sapphire (CN)       
• Samsung Sumitomo LED Materials (KR - JP)    
• Trinity Materials