27 June 2011

Dedicated LED packaging equipment to drive $2bn investment over 2011–2016

Up to now, LED packaging houses have relied mostly on using retrofitted equipment and materials from IC fabs to improve LED cost of ownership and performance, but what was once a cost-saving and field-proven option is becoming too far removed from the specific needs of LED devices and is now constraining the LED industry, reckons Yole Developpement in its market research report ‘LED Packaging 2011’ (to be release in July), which covers the market for capital equipment, packaging trends, and LED manufacturing capacity expectations through 2016.

Although LEDs can have long-term cost benefits over traditional lighting technologies for example, their upfront costs have been inhibiting widespread adoption, notes Yole. However, with packaging accounting for 20–60% of the packaged LED’s total cost, this stage of the manufacturing process represents the biggest area for cost reduction.

In particular, the LED market has now gained enough momentum and reached a critical mass to entice equipment and material providers into developing dedicated solutions for LED fabrication and packaging, Yole says. Many dedicated solutions are emerging from both existing and new players that can allow a significant reduction in LED manufacturing costs through improved yields, throughputs and material efficiency.

Consequently, over 2011–2016 more than $2bn will be invested in new equipment for LED packaging, including laser lift-off (LLO), permanent wafer/die bonding, singulation and testing, reckons Yole.

However, growth in the LED industry will not be straightforward, as a few mini down/up-turn cycles will occur through 2016, reckons Yole. In particular, with the general lighting market scheduled to reach $20bn by 2020, no LED makers want to get caught short of capacity. The consequent rush to add capacity for the anticipated spike in demand led to an unprecedented cycle of investment that started around the end of 2009 and is expected to extend through early 2012.

This cycle, initiated in Korea, is now essentially fueled by subsidies and other incentives in China, as the country is aggressively trying to position itself as a future leader in solid-state lighting. New entrants are investing heavily to displace existing manufacturers. This will lead to a global averaged overcapacity that will briefly exceed 50% for some tools (i.e. a capacity utilization rate of less than 50%) by mid-2012.

The over-investment in LED packaging equipment in the last 2 years and the resultant absorption of this overcapacity will create a short 12–18 month down-cycle, starting in early 2012 and extending through mid-2013, forecasts Yole. This may cause some consolidation, predicts Yole, before utilization rates return to the more usual 80% range. By mid-2013, a new investment cycle will begin, fueled again by increasing demand for general lighting. However, this may lead to another, shorter period of excess investment to be absorbed in 2016.

In contrast, material and component suppliers will enjoy a smoother ride, with regular growth at a compound annual growth rate (CAGR) of 27.6% between 2011 and 2016, forecasts Yole.

In particular, package substrate makers will see the fastest growth, with a CAGR of 45% through 2016. Phosphors will experience strong price pressure but will still enjoy double-digit growth, with a CAGR of 12%. However, there is still a lot of room for innovation in this field, which could pay off in capturing more added value, reckons Yole. For such products, it remains paramount that the solution offers an overall reduction in cost of ownership ($/lumen) to LED makers.

The report ‘LED Packaging 2011’ reviews the major challenges associated with the key LED packaging process steps. It focuses in particular on the most recent technologies and market trends for high-power LED and packages and arrays, and provides quantification for various materials and equipment associated with each of those key steps. Trends that are analyzed include emerging technologies such as silicon substrates, wafer level packaging (WLP), and chip on board (COB).

See related items:

LED fab equipment spending triples in 2010, driven by China

Tags: LEDs LED packaging equipment

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