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Sapphire Applications & Market: from LED to Consumer Electronic - August 2014 Edition
Aug.2014

led makers commitment to a silicon platform sapphire report
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Description

Flyer Sapphire August 2014Apple saved the sapphire industry in 2013 and could transform it in 2014.
Will the revolution happen?


WHAT’S NEW COMPARED TO LAST EDITION?

        • Updated analysis of new consumer electronic applications: smart watches, camera lens and fingerprint reader covers, and display cover
        • New application: sapphire as a packaging substrates for LED filaments.
        • Updated analysis of the GTAT/Apple partnership: display cover manufacturing cost modeling, supply chain capacity analysis, yield impacts and paths to cost reduction
        • Apple sapphire patent analysis
        • Recent sapphire substrates price trends
        • Updated supply and demand analysis.
        • Recent news

APPLE SAVED THE SAPPHIRE INDUSTRY IN 2013…
The sapphire industry recently ended a long period of depressed pricing and achieved US$936 million in revenue for wafer products in 2013. Recovery was helped by an increase in LED demand due to accelerating adoption in general lighting and a resilient LCD backlight market. But the saving grace was new consumer electronic (CE) applications: camera lens and fingerprint reader covers, mostly driven by Apple in 2013. Adoption at other vendors is progressing at a slower pace than anticipated in 2014. LG even reversed the trend with its flagship cellphone:  its G2 model featured a sapphire lens cover but the G3 uses glass. However, we are optimistic for the mid-term with adoption increasing in Taiwan and China. In addition, new applications such as LED filaments could further increase sapphire consumption.

After almost 2 years of losses, the price of sapphire cores increased more than 50% in 2013. In Q2-2014, tier-1 sapphire vendors were finally selling at breakeven prices. However, we expect that prices will decrease again in Q4.

The report provides historical price trends and forecasts for cores and wafers, detailed capacity and revenue analysis, rankings and market share, as well as a thorough supply vs. demand analysis.

Cost and supply chain capacity yield sensitivity analysis Sapphire report


 …AND APPLE COULD COMPLETELY TRANSFORM THE INDUSTRY IN 2014…MAYBE.
In November 2013, GTAT and Apple announced a partnership to set up a large sapphire manufacturing plant in Mesa, Arizona. Our thorough analysis concluded that the objective of the investment is to produce sapphire display covers for cell phones.

Apple plans to introduce both a 4.7” and a 5.5” model this year. We believe that prices for the sapphire cover have been agreed upon and locked by contract, based on yield assumptions reflecting reasonable expectations from all partners. We used yield assumptions derived from other Tier-1 sapphire makers in the LED industry to model the cost for both sizes. For the finished 4.7” display, we estimate a cost of $16, including $6.7 at the slab (material) level. On the longer term, we see a path for <$13. Under those assumptions, we also estimate that the supply chain could deliver more than 5 million display covers per month.

But the challenges in term of ramp up execution are unprecedented in the industry. Recent checks point to bottlenecks at various levels of the process with lower than anticipated crystal growth and finishing yields. As of August 2nd 2014, we estimate that the supply chain capacity is currently ~2.1 million units per month. If yields don’t improve rapidly, Apple walking away from sapphire is still a possible scenario. We believe that moderate quantities of supplemental material is currently being sourced from GTAT equipment customers in China. But even if all partners manage to improve yields rapidly, we still exclude the possibility that sapphire can be used on all models of the new 2014 iPhone.

However, we still expect that at least one model (SKU) will be offered with a sapphire cover. This would allow Apple to plant a stick on the ground and make a statement. Scarcity could even be a good marketing tool providing it doesn’t last too long and that the supply chain catches up quickly. Releasing at least one SKU with sapphire would allow Apple to gage customer response and decide if it should adopt sapphire on more models, plan for more investment in the supply chain or simply walk away.
For the procurements of wafers for camera lens and fingerprint reader covers, Apple is now taking a back seat and letting their Chinese finishing contractors handle the sourcing. This resulted in accelerated commoditization (strong price pressure) and shifted large volumes toward Chinese sapphire vendors. Combined with current high levels of inventories, this has significantly impacted established vendors since the beginning of the year.

LED makers commitment to a silicon platform Sapphire report


Procurement has started for the iWatch and is so far mostly benefiting Chinese vendors as well. Various designs have surfaced including one with a curved display (“2.5D design”) which would be more expensive to produce. In any case, we expect that Apple will keep tapping into the existing supply chain and let GTAT focus on display covers.

The report includes a thorough analysis of the GTAT/Apple deal. It explains key hypothesis of our cost model and provides thorough yield sensitivity analysis for cost and capacity. Cost, capacity and revenue models are presented for both 4.7” and 5.5” displays.


THE SAPPHIRE INDUSTRY TO BENEFIT BUT NOT EVERYBODY WILL WIN.
With display applications, total revenue from polished sapphire products could grow at a 50% CAGR through 2018 and exceed US$5b. If successful, Apple will use sapphire as a strong element of differentiation versus Samsung and other competitors.
 
The impact is positive for the industry. It brings a lot of visibility to sapphire and could spur new applications. Samsung and LG are currently perplexed by Apple commitment and show no signs of following suit in the short term. If this was to change, their scale would require that they perform a similar move to Apple and set up their own supply chain. Sapphire shortage might occur if Tier-2 cell phone OEMs decide to use sapphire as well. Their volume needs will be too small to justify an Apple-like investment so they will tap into the existing supply chain. Even a small % of adoption will require vast amounts of sapphire.

The report analyzes the impact on the sapphire industry and supply chain.

Example of new sapphire application Sapphire report



OBJECTIVES OF THE REPORT

  • Trends and drivers in established and emerging applications
  • Apple and GTAT invested more than US$1 billion in sapphire manufacturing. Will the iPhone 6 have a sapphire display cover?
  • Drivers for adoption of alternative LED substrates (GaN and Si)
  • Sapphire supply & demand trends: Where are prices headed?
  • Identify and know the key players (established and emerging)
  • Geographic trends and specificities
  • Technology trends


Table of contents

Glossary 9
Definitions 10
Open and captive markets 11
Executive summary 12
> Key takeaways
> 2012-2019 sapphire revenue forecast (polished parts level)
> Industry trends: demand from established applications (LED + CE) / prices
> The GTAT – Apple partnership: overview / why so much sapphire? / our scenario /mesa capacity and revenue model / second sources / risk and longer term trends
> Sapphire for LEDs: 2008-2019 wafer volume and diameter breakdown / 2008-2019 PSS & CSS revenue forecast
> Alternative substrates for LED: overview / GaN substrates / silicon substrates / 2012-2020 LED substrates market shares
> Silicon on Sapphire market: the death of SoS / 2009 – 2019 SoS volume and revenue

Noteworthy recent news 41
Industry overview 47
> Sapphire properties / manufacturing / value chain: business models and trends
> Core prices: 2010-2014 quarterly trends / discussion / core length and exclusion zones / how much recovery? / the 2009-2013 cycle / current cycle - scenario
> Price scenario: controlled capacity increase and pricing / strong demand increase and shortage
> CSS wafer prices: 2010-2014 quarterly trends / discussions
> PSS wafer prices: Q1-2011 through Q2-2014 quarterly trends / 2” full wafer cost and margins
> Price forecast & price per surface
> Sapphire core and wafer 2013 revenue: Top 20 companies / 2014 trends
> 2013 revenue geographic breakdown: cores, CSS, PSS and CE wafers

Alternative substrates for LED 76
• GaN-on-GaN LEDs 77
> LED efficiency: definitions and metrics / current status & expectation / “efficiency droop” problem / ideal LED with no “efficiency droop” / possible solutions to the “efficiency droop”
> Benefits of GaN substrates: performance / wafer bow & yields / MOCVD cycle time / vertical structure
> Challenges of GaN on GaN LED: heat management
> GaN on GaN LEDs: SWOT analysis / potential applications (general lighting, others) / LED die cost simulations / GaN-On-GaN cost efficiency
> GaN vs. Sapphire: breakeven price analysis
> 2014-2020 GaN penetration forecast per application / per lamp type
> GaN on GaN LED manufacturers overview

GaN-On-Si LEDs 100
> Key benefits / technology challenges
> Conditions for success: overview and status/ trends / commercial status (Q1-2014) / Toshiba TL1F1 LED / binning yields
> CMOS fabs compatibility: overview / gold contamination / LED specific equipment
> Cost simulation: key hypothesis / results / discussions
> Cost reduction claims
> LED-On-Si cost of ownership
> LED markets players & recent comments
> LED makers positioning
> Will LED-on-Si happen? Scenarios
> Conclusions: 2012-2020 substrates market shares

Sapphire market for nitride LED 129
LED market overview 130
> Introduction to High Brightness LEDs, segmentation, LED applications, benefits
> Packaged LED price trends & cost structure of lighting products
> LED adoption trends: overview / general lighting - market segments / socket occupancy/ current and long-term trends
> 2008-2020 packaged LED revenue forecast by application
> LED qualified die surface forecast by application
> Market cannibalization and economic incentives for manufacturers
> Evolution of lighting socket occupancy by technology

Nitride LED manufacturing capacity 152
> 2010-2014 GaN MOCVD capacity evolution: geographic breakdown
> GaN MOCVD capacity vs. demand
> MOCVD utilization rates: geographic breakdown
> MOCVD capacity and wafer starts: geographic breakdown / discussion

LED sapphire wafer volume and revenue forecast 160
> Regional breakdown
> Incentive for large diameter wafers: MOCVD throughput
> Challenges and incentives for large diameters
> Diameter trends: Q1-2014 diameter breakdown / geographic breakdown / 2008-2019 forecast
> 2008-2019 forecast: diameter breakdown in TIE / diameter breakdown in wafers / cores diameter breakdown / PSS vs. CSS (open & Captive) volume breakdown / LED substrates revenue (PSS and CSS)

Patterned Sapphire Substrates (PSS) 180
PSS technology overview 181
> PSS benefits: light extraction efficiency and IQE / when are PSS used ? / how much light improvement?
> Examples of PSS in commercial LEDs
> Pattern designs: overview & trends / nano PSS
> Conclusion on technology trends

PSS manufacturing 194
> Manufacturing process overview
> Established lithography techniques for LED
> Emerging techniques: nano imprint lithography / displacement talbot lithography
> Wafer requirements for PSS
PSS market trends and supply chain 202
> Pss adoption trends
> Volume breakdown and adoption rates per region
> Supply chain: overview / evolution / breakdown by supplier type
> Supply & demand: geographic breakdown
> Sourcing: geographic breakdown
> PSS capacity In Taiwan / Korea / China / Japan / US
> IP landscape overview / litigations: bluestone

Sapphire substrates for RF applications: SoS 218
> Introduction: Epitaxial SoS / “Bonded-SoS”
> Antenna switches technologies for handsets
> Peregrine semiconductor: latest news / 2005 -2013 shipments and revenue / key markets / growth drivers / headwind and tailwind
> Trends in wireless RF antenna switches
> Evolution of peregrine ultra CMOS technology
> Peregrine substrate platforms
> RF front end modules: technology trends for the key components
> Technology trends for antenna switches in handsets
> Supply chain
> Volume and revenue forecast

LED filaments 243
> Overview / Materials / Manufacturing process / Performance
> Prospects & forecast

Sapphire supply and demand analysis 251
> Definitions and metrics for material capacity
> Material & finishing capacity: Q1 2013 vs. Q1-2014 geographic breakdown / top 20 manufacturers.
> Qualified vs. unqualified capacity
> China: overview / discussion / emerging companies
> Taiwan: overview / mainland operations
> Europe / Korea / Japan / US
> Supply vs. demand: wafer only / adding display cover

Consumer electronic applications 277
Camera lens cover and “home button” 278
> Camera lens cover
> Home button / fingerprint readers
> Manufacturing: overview / laser cutting
> Apple sapphire wafer supply chain: overview & discussion
> Volume and revenue forecast: 2012-2019 sapphire adoption rates / core volumes / wafer volume and revenue

Smart watches 291
> Overview / Smart Watches and Sapphire
> Smart watches: 2014-2019 sapphire volume & revenue forecast / discussion

Display covers 298
> Overview & current status
> Touch panels: technology / supply chain
> Cover lens manufacturers
> Cover lens manufacturing process
> Technical and consumer trends: impact on sapphire adoption
> Potential benefits of sapphire: stronger displays / customer satisfaction / warranty cost / touch sensitivity
> Sapphire drawbacks
> Smartphone BOM
> The case for sapphire display cover
> Sapphire to the test: GTAT and Corning
> Performance variability : finishing process / material
> Rugged or curved displays: which strategy for differentiation?
> Aftermarket screen protectors
> Sapphire growth methods for display covers / focus on VHGF & EFG

The GTAT - Apple Deal 324
> Why GTAT?
> What’s in for Apple? / What’s in for GTAT?
> So much sapphire: what for?
> Cost, capacity and revenue model: What we know and what we inferred
> Supply chain
> Cost simulations: tool & main hypothesis / results / comparisons with previous work / total capex / discussion, price for Apple
> Yield impact on cost and supply chain capacity
> Product launch scenario & GTAT Mesa revenue model
> Second source?
> Exfoliation, a potential enabler?: overview & cost estimate / IP
> Adoption at other OEMs

Apple sapphire patent analysis 372
> Overview
> Analyses by family: sapphire growth, sapphire strengthening, sapphire cutting, sapphire parts and components
> Others

Company profiles: established vendors 391
> Summary
> Aurora Sapphire (CN) - 哈尔滨奥瑞德光电技术股份有限公司
> Crystaland (CN) - 云南蓝晶科技股份有限公司
> Crystal Applied Technology Inc (TW) - 晶美應用材料股份有限公司
> Crystalwise (TW) - 兆遠科技股份有限公司
> DK Aztec (KR) - DK아즈텍
> GTAT (US)
> Hansol Technics (KR) -한솔테크닉스 주식회사
> Iljin display (KR) - 일진디스플레이
> Monocrystal (Ru) – Монокристалл
> Namiki (JP) - 並木精密宝石株式会社
> Procrystal (TW) - 鑫晶鑽科技股份有限公司
> Rubicon (US)
> Sapphire Technology (KR)
> Silian Sapphire Corporation (CN) - 四联蓝宝石有限公司
> Tera Xtal Technology (TW) - 鑫晶鑽科技股份有限公司
> USI Optronics Corporation: (TW) - 台聚光電股份有限公司

Company profiles: emerging vendors 430

> Nanjing J-Crystal Photoelectric Science & Technology (CN) - 南京京晶光电科技有限公司
> Crystal Optech - 浙江水晶光电科技股份有限公司
> OCI (KR)
> Unionlight Technology Co. Ltd (CN) - 元亮科技 集团
> Guizhou Haotian Optoelectronic Technology (CN) - 贵州皓天光电科技有限公司
> (Guangdong) Saifei Sapphire (CN) - 广东赛翡蓝宝石科技有限公司
> (Zhejiang) Shangcheng Science & Technology (CN) - 浙江上城科 技有限公司
> SSLM (KR) - 에스에스엘엠 주식회사

Annex : forecasting artificial light consumption 443

 

Companies cited

Aceplux Optotech
Aledia
AND
Apexcera
Apple
Asahi
Aurora Sapphire
Aurotek
Azzurro
Baltic Crystal
Biel
BIEMT
Bluestone
BONS Technology
Bridgelux
Canyang
Chi Mei Opto
Corial
Corning
Cosmoled
Cree
Crystal Applied Technology
Crystal Optech
Crystaland
Crystalwise
C-Sun
CT Lab
DK Aztec
Electech (ETI)
Epilight
Epistar
Everland
Everlight
EVG
Exiton
Formosa epitaxy
GAPSS
GCL Opto

Genesis Photonic
Glo
GTAT
Guangdong Saifei Sapphire Technology
Hanmak
Hansol Technics
HTOT
HC Semitek
Hefei Crystalbridge
Hualeled
Huga
Hyperion Geocrystal
Iljin Display
Kama Crystal
KQT
Kyocera
Lammbos
Lattice Power
Lens Tech
Lextar
LG Innotek
LG Siltron
LGS
Lucemitek
Meyer Burger
Monocrystal
Namiki
Nanjing J-Crystal Photoelectric (NJC)
Nantong Tongfan
Nationstar
Nichia
OCI
Oppel Lighting
Osram-OS
Peregrine Semiconductor
Philips Lumileds
Plessey
Procrystal 
Rigidtech
Rofin Lasag
Rubicon
Saifei Sapphire
Samsung
San Shi Semiconductor,
Sanan
Sapphire Technology (STC)
SAS
Seoul Viosys
Shangcheng Science & Technology
Shinkosha
Silan Azure
Silian Sapphire
Sinonitride
Soitec
Soraa
SSLM
Sumitomo Chemical
Sumitomo Metal Mining
SUSS MicroTec
Takatori
TDG Core
Tekcore
Tera Xtal (ACTC)
theLED
Tianxing Lighting
Toyoda Gosei
Trinity Materials
TSMC
TXC
Tyntek
Ubilux
Union Light Technology
USI Opto
Walsin Lihwa
Yangzhou Zhongke 

 

KEY FEATURES OF THE REPORT

  • In-depth analysis of the GTAT/Apple deal: cost, capacity and revenue models, status, IP.
  • Detailed analysis of sapphire for: LED, SoS, camera lens & fingerprint reader covers, smart watches, LED filaments, display covers.
  • Volume & revenue through 2019 for all segments
  • Supply/demand, company revenue & capacity rankings
  • Wafer diameter and geographic breakdown, MOCVD capacity
  • PSS supply chain
  • Alternative LED substrates: requirements, status, players, cost of ownership modeling, forecasts.