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Production ramps in Asia
as cell phones push up HB-LED demand
Time: 2005-12-16 14:28
As mobile phone handsets continue to be the key driver
behind growth in HB-LED manufacturing, Michael Hatcher reports
from the Strategies in Light conference on a serious ramp-up
of production capacity in Asia, "kilolumen" sources and the
development of LED headlamps.
The market for high-brightness (HB) LEDs is currently one
of the fastest-growing sectors for compound semiconductor
devices. At the annual Strategies in Light conference held in
San Mateo, CA, in February, analyst Robert Steele told
delegates that the market grew 47% in 2003 to reach $2.7
billion. Steele's figures show that the HB-LED market has
grown 350% since 1995, which also represents a compound annual
growth rate (CAGR) of 47%.
Steele calculated that a significant part of last year's
increase arose from the relative weakness of the US dollar
(Steele's estimate was that this factor had an impact of
10-15%). However, the key growth area continues to be mobile
handset applications. Phones with full-color displays and
blue-backlit keypads have ensured that this segment continues
to dominate, with HB-LED sales into the mobile appliance
market booming 87% to reach $1.37 billion last year.
Steele's latest figures showed that mobile appliances
accounted for 50% of the HB-LED market in 2003. Signage was
the next-biggest segment with 18%, followed by automotive
applications at 15%. Illumination accounted for 5% of current
HB-LED sales. All these segments enjoyed solid growth, with a
minimum of 21% market increase, in 2003.
Steele now expects the mobile market to start leveling out,
putting a brake on the overall market growth. He predicted
that the CAGR for HB-LEDs will fall to 17% between now and
2008. Price erosion will also start to have a bigger impact.
However, for high-end devices, where there are relatively few
suppliers, prices are expected to remain close to current
levels.
"Phenomenal" growth in Asia
Along with the increasing domination of cell phone handset
applications in HB-LED sales has come a shift towards
manufacturing in Asia; in particular China, South Korea and
Taiwan. HB-LED production in these three countries was the
focus of YEBY analyst Bob Walker's presentation.
Taiwan has always been the dominant player in the Asian
market outside Japan. Walker identified 11 wafer-manufacturing
companies in Taiwan (see table). Their emergence is testament
to a huge investment in the country and the low cost of
devices produced there. Meanwhile, production has increased in
South Korea through the development of several highly focused
start-up companies and the presence of key semiconductor and
consumer goods manufacturers Samsung and LG.
The last 10 years in China have seen sweeping political and
economic changes, and this has helped to foster explosive
growth of HB-LED manufacturing, particularly back-end
processing. Coupled with the huge domestic market and
investment, China has also seen several new HB-LED start-ups
and epitaxy-based companies emerge, such as Lumei, Podium and
Shanghai Blue Light.
However, wafer and chip production in the region is still
dominated by the Taiwanese operations (Walker estimates that
there are more than 250 MOCVD systems in the country), which
accounted for 87% of InGaAlP wafers produced in the region in
2003. China produced 10% and South Korea 3%. The story for
GaN-based wafers and chips is broadly the same, with 73% of
GaN wafers made in Taiwan, 16% in South Korea and 11% in
China. The relative strength of South Korea in this technology
appears to be rooted, at least in part, in the preference for
blue backlights in handsets that are made by South Korean
phone manufacturers such as Samsung.
The scene is set for this to continue in 2004, with an
expected doubling of GaN wafer and chip manufacturing capacity
in Taiwan. Walker commented that the InGaAlP overcapacity of
2000-2001 has now been fully utilized and is being expanded
on.
Another "bubble"?
The booming sector is being reflected in the earnings of
Taiwanese companies in the HB-LED business. Walker's figures
showed that for the Taiwanese industry as a whole, monthly
revenue increased three-fold from around $10 million in
January 2002 to $30 million by March 2003. A sharp dip
followed as a result of the SARS epidemic, but the monthly
figure has now recovered and has broken through the $30
million barrier once again. All the signs point to this
increase continuing, although interestingly, both Walker and
Steele warned that with the continuing large investment in
capacity they could not rule out future overcapacity similar
to that seen in the fiber-optic components industry in recent
years. "This could be a bubble," said Steele. "We'll just have
to wait and see."
For the moment, however, growth remains rapid.
Manufacturers in Taiwan, South Korea and China produced and
sold 14.1 billion qualified InGaAlP chips between them in
2003, a 25% increase on the 2002 total. This represents 80% of
world production, said Walker.
This was nothing compared with the growth in the GaN
sector, which Walker described as "phenomenal". Here,
companies in the region produced 3.1 billion qualified chips
in 2003, a scarcely believable 700% increase over the previous
year. The region now accounts for 40% of world production,
whereas just a year ago the figure was around 10%.
Cell phone advances drive sales
One of the key companies in South Korea is LG Innotek,
which makes HB-LEDs for mobile phones. The company's VP of
development, Jong-Je Jung, said that the primary reason behind
the recent increase in production of GaN devices in Asia is
the strong demand for white and blue keypad backlighting in
mobile phones, which is the fastest-growing application sector
in terms of units shipped. Keypad backlights typically require
8-12 diodes. "Price slide is a serious business issue," said
Jung. While production volumes increased rapidly last year,
severe competition in the sector saw prices drop more than 60%
from 30 cents per blue keypad backlight LED to just 11 cents
by the end of the year. In China, according to Jung, this
figure has dropped as low as 7 cents.
Another key trend in the past year was the increasing use
of LEDs for camera flash applications. Jung said that the
proportion of camera-enabled phones sold will increase from an
estimated 17% of total handset sales in 2003 to reach 28% this
year. "In 2005, more than 90% of phones in Japan and Korea
will be equipped with a camera," he added. The development of
more advanced light sensors used in cameras will also have an
effect on the HB-LED market. Whereas a 300 kilopixel CCD
sensor requires a minimum flash luminance of 1-2 lux at 3 m
distance, a 1 megapixel sensor will need a 5 lux flash to
illuminate the same distance. As consumers begin to demand
more advanced camera performance from their phones, so the
demands on LED performance will increase.
Looking towards the future markets of automotive headlamps
and general lighting applications, both Nichia and Lumileds
showed off 1000 lm HB-LED sources in San Mateo. Nichia's
Hiroki Oguro dazzled the audience with a 9 V battery-powered
multichip source in an approximately 10 x 15 cm metal housing.
The source was said to have a power dissipation of 30 W. After
Oguro's demonstration, Jason Posselt of Lumileds showed his
company's similar effort, which was connected to a separate
power supply.
Oguro, who heads up Nichia's power LED development,
informed the audience that Nichia's sales had increased by 70%
last year as the company emerged from a business transition
into what he described as its first production phase. Nichia
is concentrating on general and medical illumination
applications for high-power LEDs already, and Oguro
demonstrated some trial products, including wall, porch and
garden lamps. Nichia's development roadmap shows that the
company is expecting general lighting applications to become a
serious new market for LEDs from 2007 onwards.
Sights set on auto headlamps
Automotive applications, and headlamps in particular, were
a strong theme at this year's event. Although Lumileds has
recently broken into the front-illumination market with its
source for the Audi A8, a delegate from the automotive
industry correctly pointed out that this does not technically
equate to a "headlamp" application. This is because the
daytime running lamps that the LEDs provide are regarded as
signal lamps (rather than illumination lamps) by the auto
industry.
Two talks at the conference concentrated on the potential
of the automotive market for HB-LEDs. Bukard W鰎denweber from
the German automotive lighting specialist Hella KG Hueck gave
LED manufacturers his view on automotive lighting in general,
while Ron Steen, director of lighting R&D at fellow German
company Schefenacker Research, spoke about the requirements
and likely timing of HB-LED application in headlamps.
W鰎denweber said that LED illumination was one of the key
technological "pushes" affecting the industry. Another is the
so-called car area network, which will also influence
lighting, for example features such as intelligent headlights
that swivel when the car is turning, enabling drivers to
effectively "see around a corner". Market pulls affecting
lighting include an aging population, a desire for less
stressful driving, and increased branding of cars,
particularly via the use of night-time illumination.
W鰎denweber explained that for customers, reliability and
safety improvements (such as daytime running lamps) are less
important than the "look" of the dashboard, for example. It is
these features that customers are prepared to pay extra for,
and that will ultimately drive the automotive HB-LED market.
LED headlamps stand to benefit car manufacturers in many
ways. Current lighting technology in cars demands specific
design changes, as a recess must be punched into the car body
to accommodate the lamp. LEDs will allow much more flexible
designs. W鰎denweber said that the relatively long design
cycle in the automotive industry (three years) means that
LED-based headlamps will not emerge in production vehicles
until 2006-2007 at the earliest. He added that the adoption of
standards may slow this process, noting that it had taken
authorities nine years to approve high-intensity discharge
xenon lamps.
Steen, who previously worked at General Motors and who has
been involved in automotive lighting since 1994, also told
delegates that there was still some way to go for the
production of LED headlamps. He said that packaging of the LED
sources is a crucial issue, and believes that a
"chip-on-board" concept, in which the primary optic is molded
over both the LED chip and metal board (see figure), will be
more suitable for car headlamps than the traditional LED
package. Compared with the Luxeon package, which involves 12
parts and 13 process steps, the chip-on-board architecture
requires only 5 parts and 4 processes, said Steen.
At the 2004 Detroit Auto Show, Steen said that at least 13
vehicles showed an LED headlamp concept. "The first-to-market
race is on," he said. Each global region is actively involved
in this race, while the first proposed production schedule is
slated for late 2006. Steen warned that there would be no
production awards until the three key problem areas - optics,
thermal management and tolerance - had been solved.
With the current total headlamp market standing at about
105 million units, Steen's guess is that LED headlamps will
break into the market in 2007, to reach sales of about 600,000
units in 2009.
A word of
caution
Regarding general lighting applications, LED manufacturers
in San Mateo were given a warning by lighting designer Ted
Ferreira. He said that the lighting industry had already
endured a "terrible" experience with fiber-optic lighting and
would be wary of any new technology with extravagant claims.
"To tell lighting designers that LEDs have a 25 year life
expectancy would be a colossal mistake," he said. Ferreira
warned that manufacturers should not oversell their devices,
and he believes that LED lighting should be
application-specific at this stage. "With LEDs, the
opportunity [for architects] is to go for completely new
designs," he said. "The big issue for architects is the look,
not life expectancy or efficiency. A designer needs to be
convinced of color and brightness stability."
About the author
Michael Hatcher is the editor of Compound Semiconductor
magazine.
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