Barriers to Entry 2: Yole Developpement Talks Sapphire, New Market Entrants Unlikely to Match Yields of Industry Leaders

In Part 2 in our Barriers to Entry posts (Part 1 is here), we’re focusing on a recent report from the industry experts at Yole Developpement.  Yole analysts have been keeping a keen eye on worldwide capacity for sapphire crystal growth.  According to Yole’s Eric Virey, more than 50 companies have announced their intention to enter the sapphire growth market, with more than 40 located in China.  While the capacity plans announced by all of the new companies collectively would add up to triple world demand, Yole believes it is “a situation unlikely to actually materialize.”

Why?  These new market players have little or no prior experience in sapphire crystal growth and wafer manufacturing.  And, while there are some “turn-key” solutions to lower the barrier to entry, “reaching and sustaining high quality and high yields in sapphire crystal growth still requires significant expertise.”  Indeed the learning curve is steep to reach yield levels on par with established Tier 1 manufacturers.

Yole’s report also said that margins in 2010 were favorable to new entrants allowing them to achieve comfortable margins “despite low yields and sub-par technology.”  However, with 2 inch pricing at historic lows, Yole calculates that they will lose money at the current market prices while “established vendors with higher yields, large volumes, and a more favorable product mix, including large-diameter wafers, can achieve production cost <$5 that will allow them to maintain positive margins and weather the storm.”

For Further Reading: Yole Developpement web site

 

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About Beth

It seems like LEDs are in everything these days – backlighting everything from your mobile phone, Apple iPad and flat screen HDTV to traffic lights, light bulbs and even the kitchen sink. But, making LEDs is a complex process that begins with the creation of sapphire. Not the pretty blue gemstone, but large commercial crystals that can weigh as much as 400 lbs. Once these large sapphire crystals are grown into boules and cooled, they’re cut into cores, cut further into flat circular wafers, polished and then used to grow LEDs. About 85 percent of HB-LEDs (high brightness) are grown on sapphire. There’s not that much information out there about the process. This blog is meant to shed some light (excuse the pun) on sapphire, LEDs and the industry that is devoted to making our lives just a little brighter. In the months ahead, we’ll tackle some topics that will help you understand a little more about sapphire and LED industry. Here’s a sample of what we’ll cover in the coming months: • Growing sapphire • For a wafer, size matters • Quality - When sapphire wafers go bad • LED light bulbs • Market & myths • Interviews with industry shining stars • Reports from industry events • Current events in perspective Please join us each week to learn more about sapphire and the LED market. We look forward to seeing you.

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