Monday, February 7, 2011

WaferNEWS Watch: Popping the MOCVD bubble for LEDs

Market analysts at our sister organization Strategies Unlimited recently took a look at the rapidly rising sales of MOCVD reactors for LED production, whether it's a true market bubble, and what it means to both sides of the supply chain -- who wins and who loses. Turns out it's a bit more complicated than at first glance.

"There have never been so many orders in the history of MOCVD," asserts Tom Hausken, director of components practice. For an idea of just how wild & wooly this sector has become, consider:
  • A rumor from last month, that Golden Concord Holdings (Hong Kong) sought to purchase 500 reactors as part of a new $2.5 billion investment in LEDs;
  • Several companies have orders for >100 reactors;
  • There are two primary supplier beneficiaries -- Aixtron and Veeco -- who are "working like crazy" to deliver tools, he says.
Seems easy to conclude that there's way too many tools in the pipeline. Hausken and S-U peers drew up the following chart to calculate what they believe the world needs to meet near-term LED production (not counting normal excess or competition), vs. what the devicemakers seem to be asking for. (Note that this doesn't include assumptions about what might actually get delivered, accepted, and put into production...)

Estimated LED MOCVD reactor shipments. (Source: Strategies Unlimited)

Clearly there is a big mismatch, but the question is -- who stands to win, and who will lose? Hausken reveals all in an article for SST's sister magazine LEDs Magazine, but suffice to say that there are a lot of winners, from LED end-users (excess capacity means lower prices) to MOCVD reactor vendors (cash windfall). And even China, which is pushing this entire envelope with subsidies, generally comes out ahead due to technology and investment infusions, much like what happened with the nation's solar PV push.

On the other hand, in the event of an LED glut lower-tier LED suppliers probably will suffer, Hausken notes. And investors "may get stuck with some expensive paperweights."

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