LED surge propels MOCVD market

SAN JOSE, Calif. - Investment banking firm Barclays Capital has raised its forecast in the metal organic chemical vapor deposition (MOCVD) equipment arena from 900 tools shipped in 2011, up from 800 in its previous forecast.  

The total MOCVD tool market was close to 800 unit shipments in 2010, up by quadruple figures from 2009, said C.J. Muse, an analyst from Barclays Capital, in a report.     

The new forecast follows an ongoing surge for LED demand. MOCVD is one of the critical tools used in LED production. Aixtron, Nippon Sanso and Veeco are battling each other for share in the MOCVD arena.

Aixtron and Veeco ''appear to be closely splitting the China market. Nippon Sanso remains the dominant supplier in Japan,'' Muse said. ''Korea is split by vendor, with Samsung primarily an Aixtron account, and LG and Seoul Semi primarily Veeco accounts. Aixtron remains the dominant supplier in Taiwan, though Veeco continues to make headway into the key accounts.''

In total, ''we see the geographic mix and vendor market share driving Aixtron’s market share to (about) 54 percent in 2011, relatively flat year-over-year and Veeco’s market share to (about) 44 percent, up (about) 1 percent verses 2010,'' he said. ''From a tool perspective, this suggests (about) 484 tool shipments for Aixtron and (about) 395 for Veeco.''

The MOCVD market is not cooling down, as some had thought. ''Although sentiment on the LED equipment vendors has been fairly negative over the last few months, driven by concerns about China subsidies coming to a halt, our work suggests that this is not the case,'' he said.

Back in October, ''we suggested that China MOCVD demand was likely to grow substantially from (about) 270 tools in 2010 to (about) 450-500 in 2011. This drove our overall MOCVD market estimate of (about) 800 tools in 2011,'' he said.

''However, having compiled a bottoms-up analysis of the MOCVD market, our estimates now point to China 2011 demand of (about) 575 tools. And assuming MOCVD demand in the rest of the world declines by (about) 39 percent year-over-year in 2011 to (about) 325 tools, we now estimate that the total MOCVD market is likely to reach (about) 900 tools,'' he said.

''And importantly, industry checks suggest potential for an additional 200+ tools out of China, assuming current market dynamics hold and there is no sudden and widespread reversals in subsidy programs,'' he said. ''In fact, checks suggest that the biggest swing factor to 2011 China MOCVD demand is likely to be the speed with which the major China players are able to install and ramp tools, rather than a sudden halt in subsidies.''

China, which is expanding its LED efforts, is the wild card in MOCVD. ''Although a ramp in MOCVD shipments to China in 2011 as a result of government subsidies was widely expected, newsflow exiting the month of December suggested that at least one Chinese province – Yangzhou – will end its tool subsidy program in July 2011. This rapidly raised investor concerns that the Chinese market was overheating (even though very few tools had been shipped to China exiting 3Q10) and that the forecasts for 2011 MOCVD were likely to be cut substantially as more and more Chinese cities pulled the plug on subsidies,'' he said.

''What has occurred since that point? First, we have yet to hear of any other cities or provinces following Yangzhou’s lead in 2011. Second, the large local LED manufacturers – namely, Sanan and Elec-tech – have maintained their substantial, multi-year build plans (Sanan building capacity at three separate fabs in Wuhu (capacity of [about] 200 MOCVD tools), Xiamen, and Tianjin; Elec-Tech building capacity at two fabs in Wuhu and Yangzhou (total capacity of [about] 130 tools),'' he said.

''And third, new entrants into the Chinese market are only accelerating, including an aggressive build plan from China’s GCL Sola with potential for (about) 100 MOCVD tool install in 2011, as well as a new Lextar JV, Dalian Suzhou, with potential for (about) 50 MOCVD tool install in 2011,'' he said.

One MOCVD vendor, Veeco, on Monday announced its financial results for the fourth quarter and full-year ended Dec. 31, 2010. Sales were $300 million for the quarter, up from $119.1 million a year ago. Net income was $96.7 million for the period, up from $16.0 million a year ago.

Veeco’s first quarter 2011 revenue is currently forecasted to be between $215 and $265 million. Earnings per share are currently forecasted to be between $0.94 to $1.31.

Veeco has also rolled out the TurboDisc MaxBright Gallium Nitride (GaN) Metal Organic Chemical Vapor Deposition (MOCVD) Multi-Reactor System for production of high-brightness LEDs.

MaxBright leverages Veeco’s Uniform FlowFlange technology and automation expertise by combining multiple, new, high-throughput MOCVD reactors in a modular two- or four-reactor cluster architecture.