Sapphire dilemma: who takes the next shot

The main value-added PSS substrate is one of the market outlets for sapphire manufacturers, but it is not easy to say how long the gross profit margin can remain in the current position once the company is swarming.

Since last year, sapphire substrate manufacturers have increased the production capacity of graphical substrates (hereinafter referred to as PSS) and actively expanded the PSS market share, thereby increasing profitability and overall revenue. Manufacturers including Taiwanese manufacturers such as Sino-US Blue Crystal, Zhaoyuan, Xinjing Diamond, Jingmei, Hejing Optoelectronics, etc. are significantly increasing the capacity of 2 inches and 4 inches of PSS, and mainland manufacturers are actively entering the PSS market.

Recently, Crystal Optoelectronics announced the 2012 annual report. The annual report shows that the company's sapphire substrate revenue last year was 49.853 million yuan, and the gross profit margin was 14.74%.

At the end of 2010, Crystal Optoelectronics began to invest in the construction of LED sapphire substrate project. At present, it has formed a monthly production capacity of 200,000 sapphire wafers and a monthly production capacity of 50,000 sapphire PSS. The data shows that in 2012, the company's sapphire performance turned into a profit, achieving a net profit of 2.9 million yuan. According to Crystal Optoelectronics, in 2013, the company will continue to increase the market development of LED sapphire projects and accelerate the market share of PSS.

In addition, Dongjing Electronics also said in its annual report that in 2013, it will promote the sapphire substrate for LEDs, especially the PSS project, and accelerate the mass production of sapphire substrates and PSS.

For the Dongjing Electronics, the PSS business has indeed become a “rich mine” planned to be mined.

On May 29, 2012, the company reviewed and approved the “Proposal on Establishing a Joint Venture Company for Foreign Investment”, and established Zhejiang Dongjing Bolante Optoelectronics Co., Ltd. with CTLab, Korea, which mainly produces LED graphic sapphire substrate sheets and epitaxial wafers. Research and development, production and sales. At present, Dongjing Bolant has completed the signing of the plant renovation and equipment procurement contract.

Lose money

The statistics of the High-tech LED Industry Research Institute (GLII) show that in the field of LED sapphire substrates, the number of new projects in 2011 reached 26, and the number of new projects in the third quarter of 2012 was 14.

At present, the capacity of the sapphire crystal growth project in China is about 100 million pieces per year for a 2-inch sapphire substrate, and the actual market demand is only over 10 million pieces. Some of the extension companies are using imported products, so the domestic sapphire substrate is overcapacity.

According to GLII data, in 2012, the number of MOCVD in China's LED industry increased from 803 in 2011 to 917. The utilization rate of MOCVD capacity is only about 30%, and the operating rate is only about 50%.

The ultra-low capacity utilization rate directly led to the sluggish sales of upstream sapphire substrate manufacturers and sapphire crystal growth furnace companies last year, and prices have been falling. The current market price of 2-inch sapphire flat-panel substrates has fallen to near the $78 cost line. More Taiwanese and Japanese and Korean manufacturers shouted a jump of $6.

In just two years, the global sapphire market is like a roller coaster, and it has quickly changed from a “blue sea” to a “red sea”.

It is worth noting that at present, most of the planned and put into production sapphire projects in China are mainly concentrated in flat sheets. The PSS substrate has a low production capacity and is still in an expansion period.

Since the first quarter, the price of upstream sapphire crystal rods has slightly increased. According to a sapphire crystal grower, the price of sapphire crystal rods used to prepare 2-inch substrates in April has been 2.8-2.9 yuan/mm. Up to the current 3.1-3.2 yuan / mm.

This is the first time that the price of the upstream ingot has fallen since the sapphire substrate fell from a high of $30 to $7.

However, the industry is questioning the persistence of the current price increase of sapphire crystal rods. According to Tan Jianling, vice president of sales of Jiangsu Tongren Electronics Co., Ltd., the sapphire crystal rods will have a slight increase in the first half of the year, but prices will tend to fall in the second half of the year.

At present, the rising effect of the ingot is not transmitted to the back sapphire substrate, and the price of the flat sheet is still low at the low of $7. Wang Wei, deputy general manager of Dongjing Optoelectronics, said that the sales of the substrate market seems to have improved this year, probably because the sapphire industry is recovering after a long-term low. However, the price has not risen, and the production capacity of flat film is still excessive.

Some insiders said that the current price of sapphire substrates is a loss for the enterprise. On the one hand, manufacturers are expecting the utilization rate of the upstream epitaxial chip factory to increase, and on the other hand, manufacturers are beginning to develop into the PSS field with profit margins.

PSS benefits from lighting upgrades

“PSS is more profitable than flat and sapphire crystal sticks, and the market supply and demand are relatively tight.” Tan Jianling, vice president of sales department of Jiangsu Tongren Electronics Co., Ltd. told Gaogong LED.

The reporter learned that the flat sheet is the substrate sheet formed by the sapphire ingot after a simple cutting and polishing process, and the PSS substrate realizes the light on the substrate by etching a regularly arranged cone on the surface of the substrate. Multiple reflections within the chip to achieve an increase in the extraction efficiency of the external light of the chip.

“The price of flat film has been lower than the average cost of the industry, and the processing and sales of PSS is relatively stable, and the gross profit is considerable. The price is about double that of the flat film, which is basically around $15.” Tiantong Shares (SH.600330) Guo Yuebo, director of the marketing department, said that the light output efficiency of the epitaxial wafer made by the PSS substrate is 20%-30% higher than that of the flat substrate, and the brightness is also greatly improved. Many epitaxial manufacturers also tend to grow epitaxy on PSS substrates.

Dr. Zhang Xiaofei, CEO of Gaogong LED, said that the market for sapphire manufacturers is to increase the scale of long crystals and seize market share by cost advantage. On the other hand, it is to seek high value-added sapphire substrates. PSS substrates are among them. one.

Due to the rapid decline in the price of sapphire flats, the sapphire substrate factory began to purchase Lithog and etching machines on a large scale in the past year to increase the PSS production capacity, thereby increasing the gross profit margin of the products.

"With the wide range of applications of PSS substrates, the demand for ICP etching machines will show a significant growth trend in the next few years." Zhao Jinrong, president of North Microelectronics, a member of the G20-LED Summit, told the "High-tech LED" reporter. As the only high-end equipment supplier in China that can provide industrialized ICP etching machines, the sales volume of ICP etching machines has shown a significant growth trend last year.

With the continuous improvement of the localization rate of upstream technology and equipment, the cost of LED lighting has also been declining. In 2013, the demand for LED lighting will improve. The demand for PSS for lighting-grade chips is growing, and many chip factories are now increasing the use of PSS.

"Now our Blu-ray chips are already using PSS." Liu Xiwen, deputy general manager of Shandong Inspur Huaguang Optoelectronics Co., Ltd., a member of G20-LED Summit, said that Inspur Huaguang is now packaged into white light devices with blue LED chips (1023 series). The luminous efficiency is above 140lm/W.

“PSS is a new technology that has only appeared in the last three years. It has fewer employees and higher technical difficulty. The PSS market has not competed in the full competition stage like the flat film, so the price and gross profit are quite considerable. It can be said that it is 'landscape alone. Okay.” Guo Yuebo told the reporter of “High-tech LED”, especially since the beginning of this year, the demand for LED lighting applications has grown rapidly, and the sales of sapphire substrates have improved, especially the sales of PSS.

"It is hard to say how long the price and gross profit margin of PSS can be maintained in the current position, because now Changjing Plant and Epitaxial Chip Factory are starting to do PSS."

Zhang Xiangxin, director of the domestic business department of Suzhou Haibo Crystal Co., Ltd. said that the sapphire substrate is more considering the yield of the product, and the yield will be high, and the company should start with more yield. According to industry insiders, although the price of PSS is twice as high as that of flat film, the supply of PSS substrate has been amplified. With the price drop and the increase in brightness of LED lighting, the penetration rate will increase rapidly. GLII believes that after a wave of investment expansion in 2011, sapphire is no longer a market dominated by a few manufacturers. In the future, as market competition intensifies, the price of 2-inch sapphire substrates will basically bottom out, and large-size sapphire substrates and PSS will also find a balance between supply and demand in the process of gradually decreasing prices.

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