silo.tips_status-of-the-sapphire-industry-eric-virey-senior-analyst-led-sapphire-and-displays.pdf

Status Of the Sapphire Industry.
EricVirey
Senior Analyst – LED, Sapphire and displays.

2
© 2016 | www.yole.fr | About Yole Développement
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Sensors
OLED and
Displays
Compound
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FIELDS OF EXPERTISE
Yole Développement’s 30 analysts operate in the following areas

3
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Market,
technology and
strategy
consulting
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Due diligences
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www.bmorpho.com
Manufacturing costs analysis
Teardown and reverse engineering
Cost simulation tools
www.systemplus.fr
IP analysis
Patent assessment
www.knowmade.fr

5
2015 APPLICATION BREAKDOWN
There’s
more
than
just
LEDs!
2015 Material Consumption Breakdown Per Applications.
(Note: excludes traditional watches, aerospace, defense, medical, industrial etc…)
LED
Optical Wafers
Smartwatch
Cover Glass
© 2016 | www.yole.fr | Sapphire Market & Technology
Cell Phone
Cover Glass
Huawei
Kyocera
SOS

6
SAPPHIRE SUPPLY AND DEMAND
Dramatic global excess
capacity!
But situation is complex:
• Leaders still operating at close
to full capacity while tier-2 are
idle.
• Large amount of capacity is not
qualified for most applications.
• “Ghost Capacity” in China
[1] Includes: LED, optical wafers, SOS, Apple Watch.
[2] Supply and demand for LED, Optical wafers and SOS (excludes Apple Watch finishing capacity at Biel and Lens
which requires 2.5D and 3D capabilities)
[3] Open market only: excludes demand and capacity at LED makers
3x
2.2x
1.8x
Sapphire Supply and Demand
(Exiting 2015)

7
WHY CAPACITY IS SO HIGH AND KEEPS INCREASING?
Anticipation of fast
growing LED applications:
10’s of new entrants all setting
up capacity to become #1 !!!
2010-2011 Present
Vertical Integration:
Biel-Roshow / 伯恩露笑蓝宝石
Lens / 藍思科技
San’an / 三安光電
HC Semitek / 华灿光电…
Duplication of capacity!
Anticipation of new applications
(Display covers) + More subsidies (Inner Mongolia)
DARX / 达瑞祥光电科技
EGing / 亿晶光电科技
Kingsun / 内蒙古鑫晟光电科技有限公司
Biel-Roshow / 伯恩露笑蓝宝石
Lens / 藍思科技
Aurora / 奥瑞德 …
Leaders with high
Utilization Rates:
Monocrystal
Aurora / 奥瑞德
…
No consolidation
2013-2015

8
GHOST CAPACITY AND IRRATIONAL INVESTMENT IN CHINA
• Strong incentive to increase
capacity even if there is no
market.
• GDP growth through
investment and production
rather than consumption.
• In China, a company (almost)
never dies!
Local governments
rewarded by central
government to grow
GDP
Invest in new fabs
and large capacity
increase
Share price increases
 Return on
investment
Creates Jobs and
economic activity
(local contractors,
local equipment…)
Increase land and
real estate value –
Generates tax
revenue
Dumping production
(boules) on the grey
market for zero profit

9
IMPACT ON PRICES
• Excess capacity
• Total market increasing
moderately but open
market decreased in
2015: Vertical
integration >30% of
wafer market is now
captive
Dramatic Price
Decrease!
6”
4”
2”

10
SOME COMPANY RESIST BETTERTHAN OTHERS
Some companies resist.
Others are tumbling.
• CAT victim of BIEL + LENS
vertical integration of CE wafers.
• PSS focus pays off (for now).
• Russia and Japan-based companies
benefit from exchange rate.
• Cost control, performance,
quality…
銳捷
鑫晶
兆遠
晶美

11
TOO MANY PLAYERS  RATIONALIZATION IS REQUIRED
Even cost leaders
currently operating
below cash cost
 strong balance sheet
(or access to capital)
required to survive in
the storm.
Some vertical
integration possible:
• Finishing + PSS ?
• Material-only business model
not sustainable.
• LED makers: HC-Semitek +
Crystaland.
~ OK
(Revenue)
Gone!
And many
more!
Q1-2016 Status
Danger!
Strong focus on non-LED /
non wafer applications

13
SAPPHIRE FOR LED:
Oversupply
and strong
inventory in
H2-2015 now
improving.
103
131
Strong growth in general lighting:
Massive adoption + upgrade cycle from
smart lighting.
Moderate decrease in large displays:
4K, High Dynamic Range,Wide Color
Gamut need more LED per TV + OLED TV
delay  slow down the decline.
Strong decline in small displays: OLED

14
OPTICAL WAFERS: CAMERA LENS COVERS
The HTC One M9:
Sapphire camera lens
Huawei Honor 7 (华为):
Sapphire camera lens
2015 2015
蓝宝石!
蓝宝石!
Sapphire is not a
strong
differentiator.
But cost is
decreasing:
Now < US$0.50
 Accelerate
adoption ?

15
EVOLUTIONTOWARD DUAL CAMERAS?
HTC M8
(2014)
HTC Butterfly
2 (2014)
Huawei Honor
6+ (2014)
HTC M9+
(2015)
ZTE Axon
(2015)
Huawei
P9 (2016)
iPhone 7,
7Pro ?
2016
Artist
Rendition
Dual Camera:
Improves depth of
perception, brightness,
low light and color
performance.

16
DUAL CAMERA IPHONE 7 COULD INCREASE SAPPHIRE USAGE
20 cm2 - 52 lenses
Previous iPhones:
Circular lens covers extracted from 2” wafers
36 cm2 - 28 lenses
iPhone 7 ???
Oblong lenses from larger square wafers (?)

17
OPTICAL WAFERS: FINGERPRINT READER COVER
The Meizu MX4 Pro (魅族):
Fingerprint reader from Goodix with a
sapphire cover
2015
蓝宝石!
All iPhone and most
iPad now have
fingerprint readers
蓝宝石!
• Sapphire is
expensive (~$1.9)
• New high-k material
are emerging.
• Apple has strong IP
 very low adoption
outside Apple
• New entry level 4”
“iPhone SE”
• Fingerprint readers
will become as
popular as camera
phones.

18
WILL APPLE (AND OTHERS) ELIMINATETHE HOME BUTTON?
2015
Button for
fingerprint sensor
Fingerprint sensor is under the display or into
the display stack
2017 – 2018?

19
SMARTWATCH:VERY DISAPPOINTING (SO FAR…)
• Only ~10% of Apple
Watches sold featured a
Sapphire display cover?
Total: 22m
Units
2015 Smartwatch Shipments
• Only other major brand
using sapphire: Huawei
• But sapphire strong with
high low/volume high
margin models from the
Swiss Industry (Tissot,TAG
Heuer…)
• Will new Apple Watch
stimulate the market and
offer strong use case?
华为: 300k units
Apple 蓝宝石: 1.5m Units
Others
华为: 300k units

20
OTHER APPLICATIONS ?
Smartphone
Display
Covers
Lens /
FPR
Covers
Defense
& Aero.
P.O.S
Others
Growth
Potential
Barriers to
Entry
Low
Low
High
High
90%
20%
Bubble size represents
potential 2018 revenue
Watch
Windows
Semi.

22
Will New Applications Emerge?
Cover Glass or No Cover Glass???

23
Drivers for
adoption
Superior scratch
resistance
Dielectric constant ?
Prestige, appeal
Differentiation
Uncertain
Factors
Breakage
resistance
Weight
Reflectance
Unknown attributes
THE ROADTO SAPPHIRE DISPLAY COVERS
Potential Stoppers
Higher cost
Manufacturability
Environmental footprint
Supply chain

24
APPLE 2013-2014:TENTATIVE SUPPLY CHAIN FOR > 40 M UNITS /YEAR
Total Investment > US$1.5 billion. Expected to operate at capacity from June 2014
Crystal
Growth
“Bricking” Slicing Shaping Finishing Coating
2,138 furnaces
262 kg boules
• 180+ Multi Wire Saws
• 1000’s of lapping, grinding, polishing tools
• 100+ Laser cutting tools
• …

25
APPLE 2013-2014: NO SAPPHIRE IN IPHONE 6!
Crystal
Growth
“Bricking” Slicing Shaping Finishing Coating
X
Supply chain, technology & Apple not ready: too early; too fast, too much…
 GTAT Bankruptcy!
2,138 furnaces
262 kg boules
• 180+ Multi Wire Saws
• 1000’s of lapping, grinding, polishing tools
• 100+ Laser cutting tools
• …

26
APPLE STRATEGIC MOVETO BROADER PRODUCT OFFERING?
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Entry
Level
High
End
iPhone iPhone
3G
iPhone
3GS
iPhone 4 iPhone 4S iPhone 5
iPhone 5S
iPhone
7
???
iPhone
7 Plus
???
iPhone
SE
2017
iPhone 5C
iPhone 5S
iPhone 5C
Saturation of historic iPhone
segment  Extension to entry level
since 2013
iPhone
7S
iPhone
7S +
???
iPhone
XX
??
iPhone
XX
??
iPhone 6
iPhone
6 Plus
iPhone 6S
iPhone
6S Plus
Extend to “Pro” in 2016 and “prestige” categories in 2017?
Prestige
iPhone
XXX
???
iPhone
7 Pro
???

27
HIGH END IPHONE WOULD BE GOOD CANDIDATE FOR SAPPHIRE
• Sapphire anchors the product
into the “High end / Prestigious”
phone category.
• Low volume  easier on the
sapphire supply chain.
• High margin product  better
tolerance to high sapphire cost.
2017
Premium
iPhone
With
Sapphire
Display
Cover ?
Wait for more signals in the supply chain through 2016 but
little hope overall for sapphire.
Or curved
OLED with
3D glass?

Potentially Emerging Applications

29
EMERGING APPLICATIONS IN DISPLAYS ANDVIRTUAL REALITY ?
100 PPI 200 PPI 600 PPI 2000 PPI
Increasing display
requirements for mobile
devices:
4K TV (<100 ppi) Smartphone: 200 to 600 ppi Near Eye Displays:VR,AR… > 2000 PPI
• Low power consumption
• High dynamic range
• Wider color gamut
• Fast response time
• Wider viewing angles
• Low cost
• High pixel density (Pixel Per Inch) forVR and AR
• Complex optic for AR

30
POSSIBLE APPLICATIONS IN DISPLAYS AND AR/VR?
Complex optics and micro-optics in
Augmented Reality applications
(e.g.: substrate for grating
structures)
Substrate for high mobilityTFT
backplane to drive high pixel
density microdisplays
Sapphire as a substrate for GaN
µLED

31
MICROLED DISPLAYS
Thin Film Transistor
(TFT) backplane
µLED Chips
Challenges:
• Pixel “pick and place”:
position accuracy, throughput,
cost…
• Interconnects
• Chip driving (GaN, InGaAlP)
• Low green LED efficiency
Benefits:
• High brightness
• Low power consumption
• High Dynamic Range (contrast)
• Wide color gamut
• Curved / flexible backplanes
• Lifetime
• Resolution / Pixel density
Ostendo Microdisplay: 5000 PPI
(picture: Information Display)
Each pixel is an LED chip
(~ 10 µm or less area and pitch).
Illustration:VerLASE

32
MICRODISPLAYS,AR &VR
• Use case for sapphire still need to be demonstrated!
• But potential for new high volume consumer applications.
• Apple acquired MicroLED
display Startup Luxvue.
• Magic Leap valued at > US$4.5b
• Facebook US$2b acquisition of
Occulus.
• …

33
CONCLUSIONS
Apple
LED
Wafers
New
Applications
Consumer
Markets
Lens
covers
Biel?
Lens?
• Sapphire industry in crisis.
• LED to remains the single largest application in
foreseeable future.
• Market for fingerprint + camera lens covers now
mostly captive (Biel + Lens).
• Long term prospect for fingerprint cover is uncertain.
• Little hope left for display covers: niche only.
• Many sapphire companies disappearing.To survive:
• Best cost position (yields, product mix, energy…)
• Vertical integration or focus on PSS ?
• Recognized quality and consistency + service.
• Strong balance sheet / access to capital to operate below
cash cost until market is rationalized.
• More applications could emerge:Virtual Reality /
Augmented Reality applications.

34
THANKYOU !
谢谢 !
Contact: virey@yole.fr
Submit your abstract!

silo.tips_status-of-the-sapphire-industry-eric-virey-senior-analyst-led-sapphire-and-displays.pdf

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