Several Chinese MOCVD suppliers announced their first shipments to customers in Q4 2012, which broke the long term monopoly by western companies in the key equipment market.
Ideal Energy and TOPEC are two companies located in Shanghai, which shipped their first tools to customers in December. While Ideal Energy disclosed its customer is Jiangsu Canyang (Forepi’s subsidiary), TOPEC only indicated the customer is a company located in Jiangsu Province. Both of their tools are said to have larger chamber size than current mainstream tools (i.e. than Aixtron and Veeco tools). Another MOCVD vendor named Real Faith Semiconductor also announced its cooperation with Epi wafer producer Quantum Wafer on a process test in Guangdong.
Dozens of companies started MOCVD systems research and development in China a few years ago due to its high profitability at that time. Checking Aixtron and Veeco financial data in 2009 and 2010, it was good to be an equipment supplier.
However, over capacity problem became more obvious and MOCVD installation dropped significantly in 2012. Equipment suppliers had a tough 2012. According to our latest GaN LED MOCVD forecast, 2013 will be similar to 2012. These figures are not very optimistic, besides the top two suppliers have already dominated the market for a long time, how will the new entrants compete with them?
We’ve been tracking MOCVD shipment each quarter since 2009, Aixtron, Veeco and Nippon Sanso are the only three companies who have shares in the commercial market with Aixtron and Veeco combined having over 90% market share. Occasionally, in the past, we tracked down a few tools from other suppliers, such as Applied Materials, Jusung, etc. But none of these recorded sales for several consecutive quarters while Aixtron and Veeco always have multiple customers every quarter. However, I think Chinese competitors could do better for several reasons.
- Government Support: MOCVD localization has been listed in China’s “Twelfth Five-Year Plan”. China government pays great attention to this project and it’s possible that the government may subsidize domestic suppliers.
- Potential Market: China has the largest demand market and more than half of MOCVD tools were shipped to China in the past three years. Though over capacity still exists, there will always be a need for replacements over time as companies target the lighting market.
- Cost: According to Chinese equipment suppliers, their tools could be 30% to 40% cheaper than current mainstream tools. (But a more popular term in the industry is “CoO”, which means “cost of ownership”. And there is still a question mark on the running cost of these new tools.)
The first shipment is an important step for new entrants, but it doesn’t mean the products have been accepted by the market. There is still a long way to go.
