Recently, LEDs Magazine featured an article by analyst Tom Hausken, Director of the Components Practice, at Strategies Unlimited about the recent bump in MOCVD reactor sales. MOCVD reactors are used to manufacture LED chips. According to Tom, the LED world needs more, better reactors. But, the likelihood is that this new generation of reactors will be used for high-end LEDs – the hardest to make.
On the surface, many industry observers reacted to the shopping spree in reactors negatively. Many think it is a bubble, but Tom thinks otherwise. What’s behind all this new interest in reactors? Subsidies from the China government have been encouraging a new “LED Valley” in China. The new investment is drawing in investment from Taiwan and Korea to build joint venture plants in this new “LED Valley.” Again, this is just at the surface. These reactors are likely to contribute to low-end cheap LEDs.
His rationale is that high-end LEDs need experts to run the MOCVD reactors. There are only so many of these guys for hire in China and they are paid very handsomely for that expertise, like CEOs and rock stars, at as much as $250,000 a year. Tom writes “…none of this is likely to impact the market for high-end LEDs, which are the most difficult to make. The high-end suppliers know their process well, and are likely to expand capacity regardless of subsidies.”
Who wins? According to Tom, “the end-user gains, no matter what. China gains some experience that it didn’t have, and more domestic production to serve its vision for a greener future. If overcapacity leads to a glut of LEDs, the most pressure will be on lower-tier LED suppliers.”