Moving Ahead in LEDs: China’s LED Sector Sees Fast Growth

Growth of the LED industry in China is in line with the industry globally. What are the prospects for China in this key technology sector?

China has fast emerged as a major player in the global light-emitting diode (LED) industry, creating a wealth of business opportunities. Driven by demand for LCD-TV backlighting in particular, as well as the emerging market for solid-state lighting (SSL), China is rapidly increasing its imports of metal organic chemical vapor deposition (MOCVD) equipment, while trying to move its LED manufacturing technology to the high end, with production on sapphire substrates.

Growth of the LED industry in China is in line with the industry globally. Semiconductor industry association SEMI estimates that, worldwide, investment in capital equipment for LED fabs grew from US$606 million in 2009 to US$1.78 billion in 2010.

According to the China LED Fab Industry Report, from SEMI, gallium nitride (GaN) epitaxial wafer production capacity in China will grow by over 300% from 2010 to 2012, with output eventually reaching 1,282,000 2-inch equivalent wafers per month.

According to a report in Compound Semiconductor, “China’s LED industry speeds up” (28 July 2011), China’s LED substrate sector had an overall capacity of 3.525 million square inches in 2010, up 34.4% from 2009, with an output value of RMB140 million, up 50.8% from 2009.

SEMI also forecasts that MOCVD tool installations will grow from a total of 323 installed units in 2010 to over 1,000 installed tools by the end of 2012. And in an attempt to upgrade its process technology, China has announced 10 new sapphire substrate projects.

Assisted by government subsidies, China is now the world’s leading consumer of solid-state lighting. China is also the leading producer of LCD TVs, where a migration is underway to the use of high-brightness LEDs (HB-LEDs) for backlighting. Market research firm IHS iSuppli reports that, to date, local government in China has subsidised at least 70% of the purchase price for metal organic chemical vapor deposition (MOCVD) equipment, and the research firm translates this into a subsidy of some US$1.5 million per machine. Tax and utility payment benefits are also offered to encourage investments in the domestic LED industry. And migration to more sophisticated processes using sapphire substrates is in line with the goals of the 12th Five-Year Plan.

IHS iSuppli estimates that the China market for LEDs will be worth US$5.8 billion in 2011, up 23% from US$4.7 billion last year. By 2012, that figure may have grown to US$6.9 billion. By 2015, China’s LED market could be worth US$11.1 billion. These figures represent a CAGR of 17.7%, over a five-year period.