[Source: "High-tech LED - Research and Review" May issue] In just two years, the global sapphire market is like a roller coaster, quickly changing from a "blue sea" to a "red sea." The industry generally believes that 2012 will be the most crucial year for the sapphire market. Although the market continues to be sluggish, it is also full of opportunities.
According to statistics from the High-tech LED Industry Research Institute (GLII), in 2011 alone, there were as many as 35 new sapphire projects in China.
The crisis warning of oversupply has already sounded, and the supply of sapphire substrate in the future is bound to have a staged overcapacity.
Recently, GLII reported that in 2011, the global sapphire substrate (2 inches) has an annual production capacity of about 66 million pieces, an increase of more than 100% compared with 2010. In 2011, the actual demand for global sapphire substrates was only 51 million pieces.
“Two or thirty companies flocked in on the same project, but in fact they were wasting capital.†Recently, Chen Hong, vice president of Zhejiang Xinfeng New Energy, delivered a keynote speech at the 2012 Hi-Tech Emerging Industry Technology and Investment Conference held in Hangzhou. It shows that the rapid changes in the market have also presented huge challenges for investors.
Since the second half of last year, the price of sapphire substrates (2-inch single-chip) has dropped from $35 to $8. On the other hand, the technological advancement of sapphire is also spawning a new market opportunity. Since last year, epitaxial enterprises including Europe, America and Taiwan have gradually transformed into a 4-inch epitaxial growth process.
“2012 is a key year for the sapphire market,†said Chen Hong.
Aftermarket investment continues
At the beginning of this year, the industry once rumored that there was a sapphire surplus and many projects faced a construction storm. Even so, many domestic manufacturers and investors are optimistic about the sapphire substrate.
On May 22, the Kangguang Blu-ray LED Sapphire Substrate Project with a total investment of 2 billion yuan announced that it has completed the construction of the first phase of the project. After the project is put into production, it will have a production scale of 200,000 LED sapphire substrates per month. In the next two years, through the second and third phases of the sequential advancement, the annual production capacity of 12 million LED sapphire substrates will be realized.
At the same time, domestic listed companies are continuing to increase their investment in sapphire projects.
On May 30, Dongjing Electronics (000413.sz) announced that the company plans to invest 7.2 million US dollars for the LED sapphire PSS substrate technical transformation project. GLII statistics show that there are not a few companies that have increased their capital this year and expanded their production scale.
"At present, the outlook for the sapphire market is mainly based on two factors: First, the domestic production capacity is relatively stable, and there is no expected surplus; second, everyone expects the increase in domestic MOCVD installations in the second half of the year." Industry insiders said that this year Since then, there are still many new LED sapphire projects in China.
According to GLII statistics, as of the first quarter of this year, nearly 70 sapphire projects have been put into production, under construction and newly planned in China. Among them, the proportion of sapphire projects that have been put into production has exceeded 35%.
Chen Hong said that the growth of sapphire crystals and the threshold of ordinary substrate processing technology are not high, which is one of the reasons for the influx of domestic manufacturers.
At the same time that new projects on sapphire substrates are emerging, the market for crystal growth furnaces is also a busy scene.
GLII statistics show that there are currently only 17 companies involved in R&D and production of crystal growth furnaces in China. Chen Hong said that according to market demand, 2-3 parent crystal equipment manufacturers are enough.
It is understood that the price of domestic long crystal equipment is generally 20% lower than imported equipment. Hu Xuetao, Marketing Director of Yuanliang Technology Co., Ltd. said that the gross profit margin of domestically grown crystal growth furnaces is only 20%. Everyone is using the low price to quickly seize market share.
"Low-cost domestic crystal growth equipment has also prompted the domestic sapphire substrate project to continuously increase investment weight." An industry insider told the "High-tech LED."
"This industry must be a lamp that ordinary people can afford. In fact, once the price drops, the demand will show a geometric growth." Industry insiders said that perhaps because of the expectations of LED lighting entering the general lighting market, it appeared. Investment in the middle and upper reaches of the industrial chain.
Market changes exceed expectations
According to GLII statistics, the market price of 2-inch sapphire substrates in the first quarter of 2012 remained at US$8/piece-9 US dollars/piece, down 77.14% year-on-year.
When the market for sapphire substrates skyrocketed, many companies invested hundreds of sapphire crystal growth furnaces.
"Now the price has fallen sharply, and it is something that everyone expects." Chen Hong said that all new sapphire substrate manufacturers made a financial model last year with 15 yuan/piece as the benchmark. But no one expected that the market will turn sharply. Considering that most sapphire companies currently have a small capacity, the cost per piece is at least $6.
GLII predicts that the price of the next 2-inch sapphire substrate will be difficult to rise again in the short-term, and in the long run, price fluctuations will not be too large.
From the current global sapphire first-line manufacturers' plans, everyone is turning to large-size (4-inch and above) processes and more value-added graphical substrate technology. According to GLII statistics, the proportion of 4-inch sapphire substrates in the global market will exceed 50% for the first time in 2012, and this trend will continue into 2013. The 4-inch sapphire substrate will become the mainstream in the market.
The shift in market demand, for the sapphire companies that have already started production of 2 inches, means that costs will rise again. Hu Xuetao said that if the company smashes a 4-inch ingot on the original ingot, it will add extra costs.
In this regard, Guizhou Haotian Chairman Ji Yong also expressed his concern. At present, the 2 inch process and product quality of domestic Changjing enterprises have not been completed well, and how can we quickly turn to the 4-inch process.
Chen Hong said that the market for sapphire substrates has changed more than expected, and what companies really want to do is to look at the situation and stick to the belief that “leftovers†are kings.
According to statistics from the High-tech LED Industry Research Institute (GLII), in 2011 alone, there were as many as 35 new sapphire projects in China.
The crisis warning of oversupply has already sounded, and the supply of sapphire substrate in the future is bound to have a staged overcapacity.
Recently, GLII reported that in 2011, the global sapphire substrate (2 inches) has an annual production capacity of about 66 million pieces, an increase of more than 100% compared with 2010. In 2011, the actual demand for global sapphire substrates was only 51 million pieces.
“Two or thirty companies flocked in on the same project, but in fact they were wasting capital.†Recently, Chen Hong, vice president of Zhejiang Xinfeng New Energy, delivered a keynote speech at the 2012 Hi-Tech Emerging Industry Technology and Investment Conference held in Hangzhou. It shows that the rapid changes in the market have also presented huge challenges for investors.
Since the second half of last year, the price of sapphire substrates (2-inch single-chip) has dropped from $35 to $8. On the other hand, the technological advancement of sapphire is also spawning a new market opportunity. Since last year, epitaxial enterprises including Europe, America and Taiwan have gradually transformed into a 4-inch epitaxial growth process.
“2012 is a key year for the sapphire market,†said Chen Hong.
Aftermarket investment continues
At the beginning of this year, the industry once rumored that there was a sapphire surplus and many projects faced a construction storm. Even so, many domestic manufacturers and investors are optimistic about the sapphire substrate.
On May 22, the Kangguang Blu-ray LED Sapphire Substrate Project with a total investment of 2 billion yuan announced that it has completed the construction of the first phase of the project. After the project is put into production, it will have a production scale of 200,000 LED sapphire substrates per month. In the next two years, through the second and third phases of the sequential advancement, the annual production capacity of 12 million LED sapphire substrates will be realized.
At the same time, domestic listed companies are continuing to increase their investment in sapphire projects.
On May 30, Dongjing Electronics (000413.sz) announced that the company plans to invest 7.2 million US dollars for the LED sapphire PSS substrate technical transformation project. GLII statistics show that there are not a few companies that have increased their capital this year and expanded their production scale.
"At present, the outlook for the sapphire market is mainly based on two factors: First, the domestic production capacity is relatively stable, and there is no expected surplus; second, everyone expects the increase in domestic MOCVD installations in the second half of the year." Industry insiders said that this year Since then, there are still many new LED sapphire projects in China.
According to GLII statistics, as of the first quarter of this year, nearly 70 sapphire projects have been put into production, under construction and newly planned in China. Among them, the proportion of sapphire projects that have been put into production has exceeded 35%.
Chen Hong said that the growth of sapphire crystals and the threshold of ordinary substrate processing technology are not high, which is one of the reasons for the influx of domestic manufacturers.
At the same time that new projects on sapphire substrates are emerging, the market for crystal growth furnaces is also a busy scene.
GLII statistics show that there are currently only 17 companies involved in R&D and production of crystal growth furnaces in China. Chen Hong said that according to market demand, 2-3 parent crystal equipment manufacturers are enough.
It is understood that the price of domestic long crystal equipment is generally 20% lower than imported equipment. Hu Xuetao, Marketing Director of Yuanliang Technology Co., Ltd. said that the gross profit margin of domestically grown crystal growth furnaces is only 20%. Everyone is using the low price to quickly seize market share.
"Low-cost domestic crystal growth equipment has also prompted the domestic sapphire substrate project to continuously increase investment weight." An industry insider told the "High-tech LED."
"This industry must be a lamp that ordinary people can afford. In fact, once the price drops, the demand will show a geometric growth." Industry insiders said that perhaps because of the expectations of LED lighting entering the general lighting market, it appeared. Investment in the middle and upper reaches of the industrial chain.
Market changes exceed expectations
According to GLII statistics, the market price of 2-inch sapphire substrates in the first quarter of 2012 remained at US$8/piece-9 US dollars/piece, down 77.14% year-on-year.
When the market for sapphire substrates skyrocketed, many companies invested hundreds of sapphire crystal growth furnaces.
"Now the price has fallen sharply, and it is something that everyone expects." Chen Hong said that all new sapphire substrate manufacturers made a financial model last year with 15 yuan/piece as the benchmark. But no one expected that the market will turn sharply. Considering that most sapphire companies currently have a small capacity, the cost per piece is at least $6.
GLII predicts that the price of the next 2-inch sapphire substrate will be difficult to rise again in the short-term, and in the long run, price fluctuations will not be too large.
From the current global sapphire first-line manufacturers' plans, everyone is turning to large-size (4-inch and above) processes and more value-added graphical substrate technology. According to GLII statistics, the proportion of 4-inch sapphire substrates in the global market will exceed 50% for the first time in 2012, and this trend will continue into 2013. The 4-inch sapphire substrate will become the mainstream in the market.
The shift in market demand, for the sapphire companies that have already started production of 2 inches, means that costs will rise again. Hu Xuetao said that if the company smashes a 4-inch ingot on the original ingot, it will add extra costs.
In this regard, Guizhou Haotian Chairman Ji Yong also expressed his concern. At present, the 2 inch process and product quality of domestic Changjing enterprises have not been completed well, and how can we quickly turn to the 4-inch process.
Chen Hong said that the market for sapphire substrates has changed more than expected, and what companies really want to do is to look at the situation and stick to the belief that “leftovers†are kings.
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