Investment pour in LED fabs amid rising demand

The surge in demand for LED backlights and general lighting, and LCD TVs is driving the construction of new facilities and capacity expansion plans to accommodate the rise in orders. In 2009, there were 85 LED-dedicated epitaxy/chip fabs worldwide, and an additional 94 were constructed last year, according to SEMI. At least 11 more facilities are expected in the next 12 months.
Taiwan still owns most fabs, but nearly all new units will be in mainland China. This is because some local governments in the latter subsidize the purchase of MOCVD machines or will make direct investment in the fabs as a joint-venture partner. At least 70 percent of the cost is sponsored. Authorities also offer tax and utility payment benefits to mainland LED suppliers.

Support from the government will spur $3.5 billion in spending for each year in 2010-12 on LED-related manufacturing equipment, according to iSuppli. This will allow suppliers to overcome technological limitations, including the lack of LED wafers and IPRs. It is then expected that makers in the country will emerge as major competitors in the global industry after 2015.

Under efforts to move upstream and boost capability, local enterprises are purchasing more equipment. Sanan Optoelectronics Co. Ltd, for instance, bought 107 MOCVD machines from Veeco and Aixtron in 2010, receiving close to $1.8 million from the government. It announced plans to invest $1.8 billion to construct an LED production base in Wuhu, Anhui province, in addition to earlier projects in Tianjin city and Jiangzhou, Hubei province. Currently, orders for MOCVD equipment from China have hit 1,400 to 1,600 systems.

Globally, the LED fab capacity is estimated to have increased 33 percent in 2010, and will rise another 27 percent this year to reach a worldwide total of 1.4 million wafers per month. This growth is much higher than that of the overall semiconductor capacity where single digit expansions are anticipated.

Equipment spending on fabs in 2010 was three times the previous year, hitting a new high of $1.3 billion, says SEMI. The trend is expected to continue in the next 12 months, with investment expected to surpass last year’s mark.