The global LED production equipment market will rise at a compound annual growth rate (CAGR) of more than 5% to $1.5bn in 2019, forecasts a report by analysts at Technavio. Demand for LED production equipment is currently being heavily influenced by the increasing number of fabrication plants being established in the Asia-Pacific region (APAC).
"The market witnessed strong growth in 2014 due to the increasing number of LED fab establishments in Taiwan and China because of increasing demand for LEDs in APAC. However, the growth during the forecast period will not witness much fluctuation," notes lead semiconductor equipment research analyst Sunil Kumar in the report 'Global LED Production Equipment Market 2015-2019'. "The key factors contributing to the minimal fluctuations in the market are the product life cycle of front-end equipment, which is 5-7 years, and the reduced rate of new LED fab establishments globally," Sunil adds.
Of the front-end and back-end sectors of the LED production equipment market, the back-end segment is the largest, representing 62% of the market. This segment is expected to grow at a CAGR of 9% during the forecast period due to the rising number of LED manufacturers globally.
APAC accounted for an 86% share of the global LED production equipment market in 2014. This region is expected to continue to dominate the market during the forecast period, increasing its market share to over 88% in 2019.
APAC is a manufacturing hub for LEDs and LED panel manufacturers and has high growth potential as most of the LED manufacturing companies are located in this region, notes the report. Most of the market growth in this region comes from countries such as Taiwan, South Korea, Japan and China.
Technavio's hardware and semiconductor research analysts have identified the following three market growth factors: increasing demand for LEDs; strengthening supply chain; and increasing focus on cost reduction.
Increasing demand for LEDs
LEDs are emerging as potential substitutes for traditional lighting sources such as incandescent, fluorescent, and halogen lighting. Their high luminous efficacy and lower power consumption compared with traditional lighting sources is driving demand for LEDs in general lighting applications. Additionally, LCD displays are employing LEDs in backlight units, significantly contributing to the market. The market is also seeing high demand from the automotive sector, with the integration of LEDs in automobiles.
Strengthening supply chain
Since its inception the LED supply chain has undergone drastic changes, but since 2010 restructuring has taken place, involving the strengthening of the upstream, midstream and downstream supply chains, says the report. One of the factors for a strong and established supply chain is the vertical integration of some of the major vendors such as Cree, Philips and Osram, which control a major portion of the value chain.
"Strong supply chain establishments will tend to increase the profitability of vendors as the inventory levels will be low and the cost of manufacturing can be controlled," says Kumar. "This will facilitate LED manufacturers to reduce the cost of LEDs, which in turn fuels the adoption of LEDs in several application sectors," he adds.
Increasing focus on cost reduction
High costs are a major barrier for LED market growth, forcing most vendors to focus on reducing the cost of LEDs. Key to achieving low-cost LEDs is low-cost manufacturing and the adoption of advanced manufacturing processes, states the report. The need for advances in manufacturing processes is driving the need for advances in LED production equipment too. In profiling key gallium nitride (GaN) metal-organic chemical vapor deposition (MOCVD) system vendors Aixtron, Veeco Instruments and Taiyo Nippon Sanso, the report notes that, for example, Veeco's TurboDisc MaxBright MHP GaN MOCVD multi-reactor system can improve production yield by 20% and increase footprint efficiency by 15%, the report adds. Another example for cost reduction is increasing the size of LED epitaxial wafers, concludes Technavio.
