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LED industry dominated by lower upstream

In Electronic Infomation Category: R | on January   9, 2011

With the decline in manufacturing costs and LT1498CS8 datasheet and the luminous efficiency, light failure and LT1498CS8 price and other technical breakthroughs in bottleneck, LED (semiconductor light source) has become more evident advantages, and LT1498CS8 suppliers and its completely replace the traditional light source is within sight. But for technical constraints, LED industry, all sectors of very different upstream and downstream, upstream product technology extremely difficult, and downstream packaging and application of low barriers to entry, lack of core technology, Chinese enterprises can only be gathered at the end of the industry . Despite the virtue of "low cost" advantage, China rapidly becoming the global LED package base, but the competitive position of vulnerability. Fourth quarter of 2008, LED products, prices plummeted, almost half of the order reduction, the Pearl River Delta area from many companies and other industries out, and combination of leading enterprises and the traditional lighting industry giants massive intervention, will allow the survival of SMEs more difficult to build core strength is far from easy. Analysis, LED on the lower reaches of different trends, and characteristics of different industries, investment strategy should be different.

Embarrassing sunrise industry

Discussion on the future of LED is commonplace, due to long life, low energy consumption, small size, fast response, seismic resistance to low temperature, pollution and other prominent advantages, its applications is extremely broad. Preliminary calculations, the future use of LED lighting in China each year of electricity savings equivalent to annual power generation of Three Gorges power station, at the same time reducing 80 million tons CO2, 65 Wan Dun SO2 and NO2 emissions of 32 million tons, called "the history of mankind lighting revolution "is not an exaggeration.

Very rapid development of semiconductor lighting. Statistics show that 60 years since the inception of the last century, every decade, LED lower cost ten times ten times the luminous efficiency. Technological progress and always exceeded market expectations. In 2006, Nichia Chemical of Japan (Nichia) achieved 150 Lm / W luminous efficiency, than the U.S. Optoelectronics Industry Development Association (OIDA) target set earlier for 6 years. The market a few years ago to look forward to the 2010-watt commercial grade single lamp, in 2006, had entered the commercial, has been very popular.

Chinas LED industry started in the 80s of last century, has gone through the import of the wafer chip package → Import → self-made packaging materials and devices, and several stages. In the 21st century, environmental protection and energy conservation become a hot market, LED industry is heating up. 2008 Beijing Olympic Games LED and hit a shot in the arm, the opening ceremony of the "Dream Cyclical Years" is displayed in 4,500 square meters, called the worlds largest full-color LED display monomer, when the 45000 LED grouping of "Dream rings" took off, the people of LEDs enthusiasm reached a new high.

Unfortunately, in less than a year, Chinas LED industry into difficulties from the boom. Only two months after the Olympic Games, business orders plummeted, prices plummeted, reality and imagination quite different.

Industrys most developed Pearl River Delta and Yangtze River Delta region (Figure 1), and most seriously hit. In our dozens of companies surveyed in the fourth quarter, its average price decrease of 20% or more, orders fell by half, 1 / 10 of the enterprises were forced to stop production. Although the local government strongly support, such as Guangdong plans launched "a thousand miles of thousands of" engineering, construction is about 1,500 kilometers of about 100,000 street demonstration project, which plans to add 22,100 Dongguan LED lights (in principle, limited to local businesses for supplier selection), but or Nanzu decline.

LED is undoubtedly a great space for a sunrise industry, the reality of the great contrast so excited to surprise practitioners still exist, the original form of optimism into an awkward consequences.

LED industry, many people blame the problems caused by financial crisis and economic recession, global economic depression that lead to an overall decrease in demand, making the smaller size of the market, reduced orders. Some people believe that national standards have been put forward on the LED used non-standardized production of Chinese enterprises, especially the impact of causing downstream businesses, and LED products, high prices, high power LED price is almost ten times the same power energy-saving lamps .

For the price drop, it was thought to be due Nichia Chemical of Japan and other industry leaders to reduce the price of white chip, causing everyone to follow the trend down, in addition to first-line giant China Taiwan in 2007, blindly optimistic expectations of the market expansion, Final overcapacity. Together near the end of the year, manufacturers have to sell stock to speed up recovery of its investment.

These external influences no doubt exist, but just skin deep. In fact, the underlying factors restricting the development or LED technology, and due to technical constraints caused by the unbalanced industrial structure. The Chinese unique blind decision, but also makes the majority of enterprises located in the downstream industry is very bad and low-end market.

Rapid expansion led to lower production demand and supply imbalance

Huge market demand has great appeal, but that does not mean that the business will have a comfortable space for development. Supply, or competition, and demand together determine the level of corporate earnings, while the competition is precisely the tragic end of squeezing Chinese companies in the industry can not get out of.

Chinas LED industry is very similar course and home appliance industry. Huge investment in the market enthusiasm stirred the market, can be described as fanatical, while the downstream part of the low barriers to entry, easy capacity expansion, this "short, flat, fast" mode of operation was always more grass-roots entrepreneurs in China ages.

In the PRD region, especially in Shenzhen, Dongguan and other LED production and gathering areas, scouring the manual a few cheap "bonding" (referring to wire bonders, from the English Bonding Machine), coupled with microscopes, ovens, etc. equipment, hire a few people began to package small workshops everywhere, some of them into the applications and even some new development areas. Through the town to the surrounding, higher density of small lighting plant to sell low-priced products, these small workshop production model to survive, once the market changes, these small workshops and most likely to be out of the market.

Public opinion and policy has also fueled this blind. In recent years, the development of LED industry, the local governments interest is high, the establishment of the Shenzhen, Shanghai, Xiamen, Dalian, Nanchang, LED industry base in seven and four regional industrial clusters, but not prominent features of these industrial clusters, patterns are very similar.

Rapid influx of new businesses, making the lower reaches of the rapid expansion of production capacity, more than the market demand, resulting in supply and demand imbalance, but now the recession has caused demand to decline further, exacerbated this imbalance. Whether competition or technological innovations, can the enterprise a corner, not to mention the sudden change in market demand.

Industrial structure: the upstream and downstream unbalanced

Round of the LED industry in this changing situation, the upstream companies have been hit less than the downstream business.

LED industry has the typical structure of the industry chain is not balanced, generally in accordance with the material preparation, chip packaging and preparation and application of the device is divided into upper, middle and lower reaches, although not many industry links, but its wide range of technologies involved, technical process diversification, the difference between the upstream and downstream huge barriers to entry is much higher than the upstream part of the downstream part (upstream investment in wafer preparation areas than some downstream applications thousands of times higher), showing the industrial structure of the pyramid (Figure 3) .

Which is typical of the upper and middle reaches of the technology or capital-intensive "three high" industry: tough, high input, high risk, in some aspects of technology is extremely difficult, extremely high precision technology, on technology and equipment strong dependence, and in the industrial chain link downstream packaging and application of low barriers, are labor-intensive industries.

Substrate material is the basis for LED lighting is the basis for epitaxial growth, and different substrates require different epitaxial growth technology, but also to some extent affect the chip processing and device packaging. Therefore, the substrate material will inevitably affect the whole industry technology roadmap of technical line, is the key to the various technical aspects.

1993, the Japanese scientist Shuji Nakamura in the developed GaN substrate first blue light-emitting diodes, to achieve a bright white light and realized indirectly, from light to become the most widely used semiconductor material. GaN substrate materials can be used are sapphire (Al2O3), SiC, Si, ZnO, GaN, but only the first two have been large-scale commercial use, and very few companies can provide products. Japan has been monopolized most of Nichias supply of sapphire substrate, while the U.S. is the only Cree companies to provide commercial SiC substrate business. Si as a substrate with GaN-based LED is the industrys growth and high hopes of a technical path, but because of material mismatch caused by cracking, light, low efficiency, high voltage, poor reliability, hard to overcome many difficulties, has not been true commercial (Table 1). Sapphire is the mainstream of the substrate material, but its high hardness (second only to diamond), the processing of drilling, cutting, grinding process is difficult, inefficient, and the sapphire substrate due to film in the nano-scale surface finish requirements above ground is particularly difficult.

Growth mainly depends on the wafer growth process and equipment. The mainstream of wafer manufacturing method using metal organic chemical vapor deposition (MOCVD), but even if this is the "most economic" approach, the equipment is also very difficult to manufacture large, internationally only Germany, the United States, Britain, Japan and a few other countries in a very limited number of enterprises can be commercial production equipment is very expensive, a price of 24 up to tens of millions of machines (the current price of about 300 million U.S. dollars).

Past European and American firms including Germany, Aixtron, Emcore United States and the United Kingdom Thomas Swan. In 1992, according to Philips, Aixtron, Germany (Philips) patents to produce the first multi-piece chamber of the MOCVD planetary machine. Since then, Emcore acquired by Veeco, Thomas Swan is Aixtron acquisition. But U.S. and European companies for materials research is limited, so equipment is not perfect the process parameters.

The industrys most leading Japanese companies strict blockade on the technology, in which the GaN materials of the most successful Japanese Nichia and Toyoda Gosei (Toyoda Gosei) of the MOCVD equipment is no foreign sales, another technology is relatively mature Nippon Sanso (Sanso) the companys equipment is limited to sale in Japan.

The difficulty of making a material after preparation, with a technical and capital intensive industries, entry barriers remain high. The technical problems include improved external quantum efficiency, reduce junction temperature and effective heat dissipation. At present the core technology also lies in the hands of large companies, such as the United States, HP, Cree, Osram, Germany and so on.

Packaging technology has gone through 40 years of rapid development has been very mature. Out of the heat, white light, secondary optics such as the requirements of technical indicators, piranhas, Power TOP, large size, multi-chip, UV white and other forms of packaging structure came into being. Used to encapsulate the wire machine, sorting machine prices down (the current automatic wire bonders dropped from several hundred thousand dollars more than ten million or even low-end manual wire bonders has been reduced to a few thousand dollars.) In addition, various ancillary LED package (such as epoxy resin, gold, frame, phosphor, etc.) product prices have also not high.

LED lighting application mainly refers to the manufacturing and control systems, technology more reflected in the system design, structural design, heat treatment and two or three times optical design, but compared with the upstream industry, the basic no technical difficulty.

Technology is the core and fundamental

LED comprehensive alternative to traditional lighting to achieve greater breakthroughs in cost, and solve the most critical factor is the cost of technologies, including new materials, new technology and so on, so technological progress is the ultimate LED general lighting into the fundamental driving force.

Addition to the high cost, the light failure, heat, spare parts of matching LED application performance issues are also important factors.

Present, except for individual brands more stable light output, the majority of enterprises are very serious light decay products, in particular domestic device. Now that very few industry-standard products, such as street lighting requirements of 3,000 hours of light decline less than 8%, and most fail to meet requirements of domestic LED lights.

LED directly affect the photoelectric heating efficiency and device lifetime, but also exacerbated the bad light, the industry is a major problem. Comparing the present solution is to increase access of the heat sink or by other, more favorable conductivity thermal Cailiao Lai, the simple introduction of a cooling system adds additional structure and energy consumption, so the problem of heat dissipation from the LED Zhizuo itself solve start.

The same time, long life LED short life but supporting devices, such as general LED power supply with low voltage DC power supply, power supply and other accessories in the practical application of the life of the match with LED lights is very difficult. Future exchange diode technology (AC-LED) may be able to solve this problem.

Core technology in the end what it means, the industry knows it. Since 1993, Nichia Chemical of Japan with "blue" father Shuji Nakamura, the long-term monopoly of the invention of blue LED market, from an unknown to fame was promoted to the small business industry leader in global semiconductor lighting. After 2000, Shuji Nakamura, moved to the U.S., a professor at the University of California, Santa Barbara, and the Cree company to do scientific advisor, Nichia Chemical of Japan that its trade secrets leak which led to the patent dispute, the two blue LED patent litigation battle target up to 600 billion yen, can be seen on the LED industry, an important technical level.

Different upstream and downstream investment strategy

LED industry on the middle and lower reaches have different core competencies and business models.

Upstream products and business models in a single, but very high barriers to entry, uncertainty, technological and capital is the core element; River has some of the technical content of products, but mainly depends on capital strength and management of the fine; downstream applications are diverse, more dependent on integrated operation and management of enterprises, quality, cost, brand and channel more important.

Based on different core competencies, we believe that the LED on the lower reaches of the investment strategy is very different: the upper reaches of the uncertainty is more suitable for high-risk investment (Venture Capital), which is more suitable for middle and lower PE investment (Growth Capital), or industrial capital.

Upstream: Technical winning, uncertainties large

Technological progress is an ongoing process, some only improvement, while others are subversive. The reason why LED upstream risk, because technology is not mature, and a technological revolution often means the failure of existing technology.

The end of 2007, the number of mainland MOCVD have up to 80 units, estimated in 2008 added about 40 units, while the major manufacturers, according to investment plans, 2009 could be increased by 60 units. Despite the increase in the number of devices, but is mainly responsible for production tasks, most companies prefer to buy equipment is not willing to invest more in research and development.

As companies not willing to undertake basic research, the basis of China LED materials R & D task more commitment from the universities and research institutes. Research unit wants to go it alone their achievements in industry, often results in duplication and inefficient. In contrast, China Taiwan Industrial Technology Research Institute research organization focused on planning the direction and progress, the effect is significant. Currently, rapid progress in the study of Nanchang University and Harbin Institute of Technology.

Luminescent Materials and Devices, Nanchang University, Engineering Research Center of the Ministry of Education, led by the Professor Jiang Fengyi, in the Si substrate GaN-based LED made a breakthrough progress in the development and formation of LatticePower Co., Ltd., engaged in the epitaxial material and chip production. Company said the chip has antistatic properties, long life, under the current density, packaging technology and simple, 863 Groups assessment is: "to break the current monopoly of Japans Asian monopoly of sapphire substrate and the United States Cree SiC substrate situation, the formation of a sapphire, silicon carbide, silicon substrate the three pillars of the situation. " In fact, the Si substrate current output LED products is still low, it can not be sent to the sapphire a real challenge, but still Lattice Power Corporation in 2006 and 2007, successfully completed two rounds of private equity, total funding amount of $ 52,000,000. GSR, MayfiELd, AsiaVest, Temasek and other institutional investors are betting on the technology to further breakthroughs.

Technical experts reference line of the former Soviet Union, Harbin Institute of Technology, Institute of Composite Materials and Structures, put the shoulder with cold heart trace Czochralski method (SAPMAC method) was successfully prepared large-size sapphire crystal, sapphire end pieces rely on imports of Chinese history. April 2006, researchers with the Institute, Harbin Institute of Industrial Development Corporation co-founded the Aorui De Optoelectronic Technology Co., Ltd.. June 2008, the company has successfully grown Φ320 × 300mm, weight 68.58 kg of optical-grade sapphire crystal, which is the worlds largest bubble students out of sapphire crystal growth method.

In addition, the Chinese Academy of Sciences Semiconductors has developed a growth of three 2-inch substrates for MOCVD growth of GaN material prototype, but the international community has proven there is a great gap between the 24 machines.

Some Chinese enterprises have realized the importance of technology in basic research and development on a number of attempts, the Highland Po, Jiangxi joint creation, the World Epitech, Xiamen security, powers subjects such as companies hope to develop in the upper reaches of high-end products. However, intellectual property is not empty talk, the way the business of technology is not smooth.

Steal the show during the Olympics Dalian Lu Ming Group (Physics, Chinese Academy of Sciences, Changchun Xiao Zhiguo graduate founded in 1992, is a leading semiconductor light-emitting luminescent light, and businesses, the successful 2006 World Cup in Germany the whole 300 square meters of outdoor color LED display and the 2008 Beijing Olympics "Water Cube" LED landscape lighting) on the LED chip research and development very seriously. September 2003, because the share accounted for 80% of orders for HP company abruptly canceled all the orders, the U.S. company AXT Optoelectronics Division (owned wafer growth and chip design technology) into the red, Lu Ming Group of its acquisition of decisive decision. 2004 Dalian Road, United States put into operation, some staff moved to the United States AXT Optoelectronics, Dalian, some staff to remain in the United States comprise the U.S. way the United States. Road U.S. by the Lu Ming Holdings, is responsible for R & D wafer, chip, and the terminal application of the latest technology and process to the worlds top technology simultaneously, with Xiao Zhiguo the words, "The acquisition of AXT Optoelectronics way out for at least shortened by 10 years of technical climbing time . "

Xiao Zhiguo do is a great attempt, however, the cross-border M & A is inevitably huge cost pressures and management challenges, "pay in dollar terms," there are more than 10 PhD, Lu Ming Group the possibility of using this opportunity in the upstream R & D to make real progress, yet to be tested.

River: Taiwan Business leader, mainland enterprises to follow

LED industry in Taiwan began in the 70s of last century, the first ten years focused on the downstream packaging, almost all of the required chips imported from Japan. 80 years from the last century, Taiwan enterprises to actively expand and to be successful in the upstream, where the upstream development of significantly faster than the downstream link. Currently, the chip manufacturing companies in Taiwan has an absolute advantage in production in 2007 nearly 50% of global output, LED chip indisputably become the worlds largest producer. New crystal power, Formosa Epitaxy Optoelectronics, Opto Tech, Epistar and other enterprises have become the industry leader.

Chip manufacturing equipment and management is more dependent on the refinement and Taiwan enterprises overall manufacturing advantages. In contrast, although China made Xinpian in the proportion of the output value in 2006, more than 11%, but less than the total output of Taiwans 1 / 4, and the mostly low-end products.

The main direction of chip technology is to enhance the efficiency of light, and improve the external quantum efficiency of the chip is the key to a large extent to design a new chip architecture to improve the optical efficiency of the chip, such as surface roughness, flip-chip technology .

Domestic chip manufacturers are Dalian Lu Ming, Shenzhen side large, Jiangxi joint creation, Xiamen security and so on. GaN chips per month in 2007 domestic capacity of 960KK, an increase of 60%, domestic rate raised to 35%, the luminous efficiency Yi Da Dao 80Lm / W, can replace traditional light bulbs or halogen lamps, but there are still a wide gap between the advanced world level, mainly in the chips reliability is poor, especially the light fades too much, competitive advantage is not obvious.

Downstream: integrations, the traditional giants an advantage

In LED encapsulation and application of domestic enterprises mainly concentrated in Guangdong. On the surface, some companies are in place for a certain size, some enterprises in 2006-2007 more than 20% profit margin even, but we are not optimistic.

The LED display, for example, China is the worlds largest producer and exporter, the joint creation and e-health, Yi Bisen optoelectronics companies have to enter the international market, but these enterprises are mainly low-cost rather than performance Kao advantage to win, the prices of imports show the array in the $ 10,000 general / square meter, while the prices of domestic manufacturers is only 1000-2000 dollars / square meter, and most export products are OEM for foreign companies (OEM). Meanwhile, domestic sales are rarely exceeded 3 billion, the average size and a wide gap between the international industry leader, in 2007, the United States and Belgium Barco Daktronics sales income reached 400 million U.S. dollars and 747 million euros.

Domestic enterprises claimed "intellectual property" are mostly low value of the utility model patents, mainly for high-power LED thermal solution, secondary optics and a simple white packaging and other technical issues.

Particular note is the impulsive and the LED industry, SMEs, in stark contrast to the traditional lighting industry giants until the hold. They wait for a better access time, when the market, technologies are ripe to sell. Today, GE, Osram, Philips, Sharp and other companies began to enter the LED industry, large-scale, domestic lighting, Foshan leading LED lighting products also increased investment. Large enterprises have used the brand, product quality and customer resources in the hands, channel edge in the lower reaches of large-scale infiltration.

Taiwan LED packaging companies in the downstream areas still have an advantage, Lite-On Technology, Hong Qi optoelectronics, Everlight, Bai Hong industry and other enterprises in order to cope with the impact of low-cost mainland China, have transferred production to mainland China, while trying to improve product added value. Years on from the 2004 merger wins Yang, Taiwan LED enterprises launched a massive consolidation, merger associated element arsenic Civil, Electrical and national union and crystal, and then merge element arsenic, Lian Yong (Table 3).

Into these traditional lighting and LED industry giants leading the powerful combination of weak domestic enterprises to the original brought great pressure of competition.

Of working for Wei Shiman Capital Group

LED market economics to explain

From an economic point of view, once the costs to a low enough (close to the beginning of the replacement cost of traditional lamps), LED lighting market growth will be the step, the outbreak type. Although the use of LED lamps

the actual total expenditure is lower than normal light (Figure 2), but the majority of consumers in choosing the starting point is still when the purchase price. As the absolute price of LED products than traditional light sources an order of magnitude, becoming an obstacle to consumer choice. This phenomenon is quite similar to many other energy-saving operations (such as variable frequency motor, contract energy management, etc.).

LED market is driven by two, on the one hand there is a huge alternative market, on the other hand is a technology breakthrough in speed and cost continue to exceed expectations. And emerging markets is different is that from the economics point of view, the market has shown an alternative utility function is a straight line (or close to a straight line), consumer utility maximization and consumer budget line when the intersection is a corner solution (that is, low-priced products completely replace the high end products).

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