LONDON--(BUSINESS WIRE)--Technavio analysts forecast the global LED production equipment market to post a CAGR of more than 5% by 2019, according to their latest report. The demand for LED production equipment is currently being heavily influenced by the increasing number of fab establishments in 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,” said Technavio lead semiconductor equipment research analyst Sunil Kumar. “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 added.
There are two main categories of LED production equipment that contribute to the market revenue:
- Front-end equipment
- Back-end equipment
The back-end equipment segment is the largest, representing 62% of the market. This segment is expected to grow at a CAGR of 9% during the forecast period because of 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 and increase 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. The majority of the market growth in this region comes from countries such as Taiwan, South Korea, Japan, and China.
Technavio’s expert hardware and semiconductor research analysts have identified the following three market growth factors:
- Increasing demand for LEDs
- Strengthening supply chain
- 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. LEDs have high luminous efficacy and consume less power in comparison to traditional lighting sources, increasing the high 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 witnessing high demand from the automotive sector, with the integration of LEDs in automobiles.
Strengthening supply chain
The LED supply chain has undergone drastic changes since its inception, but since 2010, restructuring has taken place, involving the strengthening of the upstream, midstream, and downstream of supply chains. One of the factors for a strong and established supply chain is the vertical integration by 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. This will facilitate LED manufacturers to reduce the cost of LEDs, which in turn fuels the adoption of LEDs in several application sectors,” said Kumar.
Increasing focus on cost reduction
High costs are a major barrier for the growth of the LED market, forcing a majority of vendors to focus on reducing the cost of LEDs. The key for achieving low-cost LEDs are low-cost manufacturing and adoption of advanced processes for their manufacturing. The need for advances in manufacturing processes is driving the need for advances in LED production equipment as well. For example, Veeco Instruments' TurboDisc MaxBright MHP GaN MOCVD Multi-Reactor System can improve production yield by 20% and increase footprint efficiency by 15%.
Another example for cost reduction is increasing LED epitaxy wafer size. The chart below presents the contribution of each wafer size to the total LED production in 2014.
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