To gain more in-depth understanding on the development of MOCVD equipment in the global LED market, as well as changes that the LED industry will face in the future, LEDinside recently interviewed Jim Jenson, Veeco's Vice President, in Shanghai, China.

According to Jenson, lowering LED prices to stimulate market demand is the sure path to explosive growth in the LED market. One direct way to lower production costs is through upgrading the MOCVD equipment and technology.

Greater China is the main battlefield for MOCVD equipment

About the booming market in China, Jenson pointed out that market momentum will remain extremely strong in 2010 and 2011. In 2009, the number of MOCVD equipment imported into China was significant. In 2010, both Taiwan and China will continue to place orders for MOCVD equipment. Jenson added, in 2010, the number of MOCVD equipment installed by Greater China’s manufacturers is estimated to be between 100 and 150, depending on the respective LED manufacturers’ speed of delivery, funding allocation, and capacity planning.

Veeco’s new MOCVD equipment, K465i, is well-received by many customers, and orders have been placed early. Veeco has held several product demonstrations for the K465i in New Jersey, USA, where many customers from Asia flew in to see the product in action and learn more about it; among them are many LED manufacturers from China. Based on Veeco's production-proven K-Series platform, the new TurboDisc K465i combines the industry's highest productivity with the capability to drive best-in-class LED yields approaching 90 percent in a 5nm bin. Fully automated with only a short recovery period required after maintenance, the TurboDisc K465i enables higher productivity and reduced cost of ownership compared to competitive tools. 

Judging from the rapid growth of the China market, the new equipment will accelerate the cost reduction of LED products, thereby stimulating market demand. Additionally, any type of government stimulus policy is considered beneficial in expanding the market potential of LED lighting products.

As for LED backlight market in China, its future growth is phenomenal, especially when many brand vendors are already aggressively setting up manufacturing bases in China. In the short term however, China’s local LED manufacturers will not impact the overall market significantly.

In addition, in the recent SEMICON China, held in Shanghai, LED equipment that are manufactured locally in China were displayed, although most are entry-level models, and such MOCVD equipment can only be used for R&D purposes.

Difference between LED manufacturers in Taiwan and China

At this stage, the Chinese government has aggressively implemented subsidy policies to attract Taiwan manufacturers to set up LED chip manufacturing plants in China, including subsidizing half of the cost of purchasing a set of MOCVD equipment. Jenson is very optimistic about the expansion of the LED market. He analyzed that the difference between LED manufacturers in Taiwan and China are primarily in technology.

He highlighted that there are differences in terms of personnel experience, technology of R&D team, as well as the production team and management team between the two. Taiwan has a long history of volume LED manufacturing.  Manufacturers that operate through joint venture may have a higher chance of success than independent local Chinese makers. As China’s technical talent pool grows, more companies will be successful in the LED market.  Compared to international manufacturers in other countries which focus on technological competitiveness, Chinese manufacturers focus on promotion and sales in the local market, and will not consider exporting to other countries in the short term. This is because local demand for LED still exceeds its local supply, in fact, a large volume of LED chips still have to be imported.

In the long term, China's LED manufacturers need to improve their LED product quality, performance and cost in order to become a global leading manufacturer. The difference in LED application is also notable, small-sized LED backlight and LED lighting products are still the mainstream in China, and lower-quality products are unlikely to be adopted in high-end LED applications.

Rapid Start program of MOCVD equipment

Jensen emphasized that Veeco also offers “Rapid Start Program” to LED epitaxy customers, providing them the ability to gain experience on the Veeco MOCVD equipment in advance of the arrival of their ordered equipment on site.  This helps the customer transition to production more quickly. Currently, Veeco’s MOCVD equipment lead time is 3~6 months.  Veeco is focused on ensuring its customers are successful with their tools and the Rapid Start Program has proven to be very popular.

Difference between LED lighting products and LED backlighting products

Jenson added, the difference between using LED chips in lighting products and backlighting products is in the specific formula, produced in different MOCVD reactors and using special layers to produce LED chips.
 
Currently, LED-backlit LCD TV are extremely popular, manufacturers from South Korea, Japan, China and Taiwan have all engaged in the production related components. Additionally, South Korea, Japan, Taiwan manufacturers have achieved large-scale production of LED backlight, and the new capacity is allocated to the LED backlight market.

However, driven by government policy, the LED lighting market has substantial room for growth. Jenson recognizes governments’ incentives of replacing conventional lamps with energy-saving LED lamps, adding, such policies also increase demand for lighting-class LED. Furthermore, LED chip manufacturers and LED packagers have also launched products with luminous efficacy of 100 lumen/watt. These technological advancements reduce the costs of LED lighting and LED backlight module, and promote the development of both markets.

The issue of LED price decline

After LED chip manufacturers purchase MOCVD equipment, despite its 5-year depreciation, the pressure of LED prices from the market surfaces in the first year of the purchase. This is mainly due to the outlets of LED manufacturers, whether it is supplied to the LED lighting industry, or to the electronics industry as a small-size backlight, or large-size backlight, the different conditions of export will affect the price of the LED product.

In particular, amid manufacturers’ aggressive purchase of MOCVD equipment, the overall number of MOCVD equipment on the market increased; naturally, as production volume increases significantly, the price of LED will fall. Under such shake in the market, many manufacturers will shine. In light of the above, Jenson is optimistic about the decline in LED prices.
 
Jenson added that Veeco’s roadmap includes developing newer MOCVD equipment, with better yield, to deliver a capital efficiency improvement of 4 times current models, but such advanced models will be launched over the next few years.

Veeco hopes the MOCVD equipment that customers purchase are ones whose capacity can be optimized and reused as much as possible during its service life, before having to upgrade to the next generation. With confidence in its future products, Veeco will grow with its customers.

Outlook for the MOCVD market

Jenson also pointed out that, Veeco's customers are quite satisfied with the company's new products, K465i. Veeco is currently increasing their output of MOCVD equipment, from 45 units in 2010 Q1, to 70 units in 2010 Q2, and the figure is expected to reach 120 units, if required, by 2010 Q4.

In other words, Veeco may be able to produce 300 sets of MOCVD equipment in 2010; though the actual shipment still depends on conditions of the market and the LED manufacturers.

Jenson estimates that the company's quarterly MOCVD production capacity in 2011 will depend on market conditions, but could be at least in line with that in 2010 Q4.  This could mean an annual output of up to 480 units.