GaN-on-Si is a new technology that has the potential to replace sapphire substrates in the LED supply chain. Erwin Ysewijn, vice president of sales and marketing at Azzurro Semiconductors, a Germany-based GaN-on-Si supplier, recently visited Taiwan. Digitimes sat down with him to discuss the market opportunities for the new tehcnology and the prospect for the overall LED market.
Q: What is the purpose of this trip to Taiwan?
A: The purpose of this trip to Taiwan is to visit our existing customers again. Most of our customers are in the advanced stage and during this trip, we are here to help our customers to move from R&D to pre-production stage. We are expecting the customers to begin pre-production in the first quarter of 2013 hence we need to fix all the obstacles in this quarter (fourth-quarter 2012), because there's a certain lead time and shipment time for the product. Most of the customers normally develop on 2-inch test substrate, but we hope our customers will go into production of 6-inch substrate and that means we need to fix the specifications, volume and shipments now. Also, we need to verify the quality.
Q: Please briefly explain the GaN-on-Si (gallium nitride on silicon) technology, how is it different from sapphire substrates, and how cost effective is it for LED chipmakers?
A: GaN-on-Si means the firms grow the LED stack on a silicon substrate instead of a sapphire substrate. The intrinsic problem for silicon is that actually the temperature coefficient is different from gallium nitride, and that is the reason why the technology was considered to be complicated in the past. Basically, firms cannot put LED on the silicon, it requires an intermediary layer like a buffer technology in between. As for cost effectiveness, sapphire has limitations such as size as firms cannot scale it up.
Sapphire is basically made into 2- and 4-inch wafers, maximum 6-inch, certainly not 8-inch. That means on size, firms cannot gain, but that is not the case for silicon. Hence silicon is cost effective on the size point of view. Silicon is also just cheaper, and easier for processing. When a customer does LED on sapphire, it's more difficult to process as sapphire is a hard material, a glass material, so it cannot be cut using conventional technology such as etching. Cutting sapphire requires laser technology, and laser cutting impacts the yield as the firm injects so much energy into the substrate, the energy will damage the junctions. For silicon, firms can cut by using grinding and etching, which is easy because silicon is a relatively soft material. So there's the size, cost, and yield factors for substrate. With all the factors combined, comparing a 200mm silicon to 100mm sapphire, firms can save up to 65% of cost.
Q: What are some possible challenges and prospect for this technology?
A: The main issue for silicon substrate is the buffer technology. If you don't have the buffer technology, it is not possible to develop LEDs with a silicon and a compound semiconductor layer, because it just won't fit. This is not a problem for Azzurro as we have a patented buffer technology. The production of LEDs depends on thermal expansion coefficient (TEC) matching. If there is a TEC mismatch, when you deposit GaN LED strucutre, due to stress, the substrate will crack, we call it GaN layer cracking. The crack lines will follow the crystal pattern, so when there are cracks, the LED cannot work. That is the challenge. With Azzurro buffer, the technology ensures that the top and the bottom layer can move independently from each other. So there will be no cracks. We want to move the LED industry to become a semiconductor world and take it from there. The goal is to move the LED industry to adopt GaN-on-Si substrates.
Q: Has Azzurro begun mass production of GaN-on-Si substrates for LED products?
A: Yes, we have begun to mass produce GaN-on-Si for LED products in our plant in Dresden, Germany. Right now, customers can "order from the shelf." We have the standard 2-, 4-, and 6-inch products and in first-quarter 2013, we will have the 8-inch product. Our Dresden plant is a manufacturing facility about 1,500 square meters.
Q: Does Azzurro have expansion plans?
A: We are looking for a new investment route. Over the course of the past few years, Azzurro has accumulated around EUR27 million (US$32 million) of investment fund. In 2012, for this quarter (fourth-quarter), Azzurro is looking for financing to support our expansion plans in 2013. We will use the current plant and install new equipment and expand the capacity. Currently, we have two multi-wafer reactors in the Dresden plant, and the company plans to buy more than two reactors and upgrade the capacity by 4-5 times. We expect more reactors to be deployed from the end of 2013.
Q: Does Azzurro have plans to set up manufacturing facilities in other regions or countries?
A: The possibility is in consideration.
Q: What are some market opportunities for GaN-on-Si substrates?
A: We have three product lines. One is Gan-on-Si templates which is very attractive for LED makers, because the firm can buy the template and build their own LEDs. We also ship some LED epiwafers to the market, but that is a smaller business. The third opportunity, and this is also very important, is the power semiconductor epiwafer. The power semiconductor market is actually bigger than the LED market, at the size around US$17 billion. Right now, Azzurro is focusing 50-50 on the LED and semiconductor markets.
Q: What is your view about the current stagnation of the LED market?
A: First of all, demand is not weak in volume, but there is a price pressure due to oversupply in some product lines. The GaN-on-Si technology is the way out when there is a price pressure as it can accommodate a new kind of cost structure. If firms adopt GaN-on-Si material and save up to 65% of the cost, firms can become profitable again. When you observe the EPS (earnings per share) of some LED firms, there is a trend as most firms have been under price pressure since previous years. At the moment, the only way out is for firms to look for a dramatic new material and innovation to come up with better figures. So we think GaN-on-Si is a leading technology for companies that want to innovate the market. The market is there, but you need to bring more innovation to keep profits up. So I think the GaN-on-Si is a good technology to bring this market back to profitability.
Q: Are you optimistic about the LED market? Which market - lighting or display - has a better chance for growth?
A: I think for the next two years, the display market will still grow. But of course the lighting market has been growing more because at the moment, the market is quite small. Also, the lighting market is more technology-driven which allows firms to easily differentiate themselves from competitors. The display market is more of a commodity market, so profitability will always be more difficult to achieve compared to the LED lighting market, which has more segments and design aspects.
Q: Outlook for Azzurro in 2013?
A: In 2013, it will be the first full year of mass production for Azzurro with all the equipment running at full speed. Right now, we don't have over- or under-capacity as all equipment have a good load. Azzurro will grow. In the first half of 2012, Azzurro was doing production ramp up, and now, in this quarter, we started mass production.
As for the European market, which is more of a power semiconductor market, not a LED market because 80% of LED makers are in Asia. As long as Asia booms, there is a good opportunity for Azzurro. Of course the final, or the end users of the LED products are in Europe and in the US, but we don't think the markets have been affected by the recession. When the bulb is broken, the bulb is broken, you have to replace it. Lighting is a necessity, which is different from the backlighting unit market because it is a luxury market. You don't need a television to survive, but you need light. The lighting market is going to grow, definitely. Also, government policies such as the phase-out of traditional lighting are forcing the LED lighting market to exist.
Q: Taiwan has strong technology for LED products, but China is catching up. Do you see a growing number of LED firms in China?
A: Yes, the number of LED firms is growing in China but not growing in the overall market as the LED industry is currently going through consolidation. Top players will continue to exist, but smaller firms will be merged or acquired. China-based firms like Sanan will grow bigger too. So in the future, there will be 6-7 large-size players left in the overall LED market.
Erwin Ysewijn, vice president of sales and marketing at Azzurro Semiconductors
