TrendForce：Only First-tier Sapphire Ingot Manufacturers Continue With Production Expansion, The Non-LED Application Field Has Become The Target Of All Manufacturers

According to the latest “2013 Global Sapphire Substrate Market Report” published by the LEDinside, a research department of TrendForce, sapphire ingot manufacturers have been in the state of “the big gets bigger” such that first-tier manufacturers with cost competitiveness have accounted for 80% of market share.

The main reason is that the oversupply in sapphire substrate market has led to continuous price decline for the past two years, such that current prices of sapphire substrate for LED applications have been lower than the production costs of numerous manufacturers. Therefore, most second-tier manufacturers without cost competitiveness have stopped ingot production and began to purchase low cost ingots from first-tier manufacturers to be processed into sapphire substrates. So far only first-tier manufacturers with cost competitiveness have production expansion plans.

In addition to the supply for LED market applications, they also hope to explore business in non-LED application fields. Currently the top ten sapphire ingot manufacturers have accounted for 80% of total market share. Since sapphire ingot price has stayed at a low level, in the future only sapphire substrate manufacturers with cost management advantages, production capacities meeting the economy of scale, and stable sales channels can survive.

The sapphire substrate industry for LED application can be generally divided into three segments of ingot growth, cutting and grinding (CSS), and PSS. Currently there are many enterprises involved in this sapphire substrate industry with different business models. Some of them are based on ingot growth with downward extension to CSS or PSS, while others are focusing on their fields of specializations. Therefore, in general there are two business models: professional specialization and vertical integration. Each company have different core competences and target customers, which will eventually determine their positioning in the sapphire substrate industry.

In early days the applications of sapphire substrate were mainly for aerospace industry such that they were mostly in Russia and US. With the emergence of LED applications, manufacturers in Japan, Korea, Taiwan, and China have begun to invest in this material field. In the next few years, the oversupply of sapphire substrate industry will remain difficult to solve with the prices dropping below the production costs of most manufacturers. This is why currently there are only several major manufacturers with cost competitiveness sticking to their mass production plans, leading to the situation of “the big gets bigger”.

Looking ahead to 2013, according to the investigation by LEDinside, those with ingot production expansion plans are mostly first-tier manufacturers such as Monocrystal, Rubicon, and STC. With the sales prices of sapphire ingots in LED market lower than the costs of most manufacturers, most second-tier manufacturers have stopped ingot production and began to purchase low cost ingots from first-tier manufacturers to be processed into sapphire substrates. So far only the first–tier manufacturers with cost competitiveness are still actively planning for production expansions. In addition to the supply for LED market applications, they also hope to explore business in non-LED application fields.

[Figure] Overview of production capacities of all sapphire ingot manufacturers