Ramp up of LCD backlighting will result in undersupply of sapphire wafers

Wednesday, 14 October 2009 07:29

Investment bank Canaccord Adams has commented recently in a report on sapphire crystal products essential to the production of light-emitting diodes, or LEDs.

The sapphire is expected to be in high demand going forward, as LEDs have grabbed a sizable chunk of the liquid-crystal display television market, where they are used to back-light the flatscreens.

"The faster-than-expected ramp of LED LCD backlighting, which began a few months ago, caught the LED manufacturers off guard, leading to near 100% utilization rates currently from sub-30% earlier in the year," Canaccord Adams wrote. The company concludes that sapphire crystal manufacturers could see significant growth from current levels simply given the massive increase in LED production the company has forecast."

Cannacord’s Dorsheimer said there may be an undersupply of sapphires for 2010, which could lead to a price explosion, not unlike what happened to solar-panel-required polysilicon a few years ago. Though the rate of the polysilicon bubble likely won't be repeated, the Canaccord analysts said sapphire pricing could rise by as much as 40% to 50% over the coming quarters.

The emergence of LED-backlit televisions, started a few years ago by Samsung Electronics Co. (005930.SE), has led to a spike for many companies dealing in LEDs.

Samsung said earlier this month that it is aiming to sell 2 million LED LCD televisions this year and that the market should intensify next year. LED televisions are thinner and have brighter display and high energy efficiency, compared with traditional LCD televisions.

In 2010, Samsung says it will sell more than 10 million of the televisions, and the worldwide market will reach 30 million units, eclipsing the normal LCD televisions. Competitor LG Electronics Inc. (066570.SE) also said it will "aggressively" expand its LED backlight offerings.

Oppenheimer analyst Yair Reiner said "Investors are looking for any way possible to play this”. "It's relatively clear that there are going to be bottlenecks in the LED market as it ramps up to supply these new applications. We will see if the bottleneck winds up being in the capital equipment or in the materials."