According to reports, the market for light-emitting diodes (LEDs) is expected to flourish in the next few years, but the supply of sapphire substrates for LED production is in a bottleneck, which may hinder the growth of the LED industry.
The sapphire substrate is a synthetic sapphire, and the recent production cannot meet the increasing demand for LEDs, resulting in an ever-increasing price of sapphire substrates. Many LED manufacturers may be sluggish or even traumatized; in contrast, a small number of producers of sapphire substrates may benefit, including American Rubicon, Russian Monocrystal, Japan's Kyocera and Miki Precision Gems.
Financial services provider CanaccordAdams analyst Dosheimer warned that the shortage of sapphire is serious. To meet the demand of LED, the production capacity of sapphire substrate must be two to three times, but it still depends on the expansion speed of LED market.
When the economy began to recover last year, the demand for LEDs as backlights grew rapidly, including televisions and general lighting applications. According to the US Department of Energy, LEDs are ten times more energy efficient than fluorescent lamps, and many companies have used them to save money. The US Department of Energy estimates that by 2020, the market share of LEDs in the US lighting market will increase significantly from the current less than 1% to 70%.
Research firm Freedonia also estimates that US demand for advanced lighting products, including LEDs, composite daylights and sodium lamps, will reach an annual growth rate of 6.8 billion in 2013 at 11%.
Dosheimer said that in the past seven months, rising demand has pushed up the sapphire price by 50%, but he does not expect new production lines to start before 2011.
Bill Weissman, chief financial officer of sapphire substrate maker Rubicon, said the company expects sapphire substrate prices to rise 15% this year. But Weisman also pointed out that sapphire substrates account for only 8% of LED wafer raw materials and should not be significantly affected. The terminal price of the LED.
Tom Griffiths, chairman and publisher of the online news journal Solid State Lighting Design, said: "Sapphire production relies on capital and equipment upgrades, while investment and loan financing are still conservative, so it is not as good as capital expansion. It used to be easy in the past."
Dosheimer said that as sapphire substrate players are still waiting to see if demand growth can continue, it will take one to two years for production capacity to meet demand. In addition, the LED industry requires larger sapphire substrate wafers, which also increases production difficulties.
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