These additional MOCVD reactor chambers led to a GaN LED surplus of 7.4 percent in 2017, which will grow to 15.8 percent in 2018 and 28.3 percent in 2019, estimates IHS Markit (reaching an average capacity utilization of 78 percent in 2019).
Focus Lighting and Shenzhen MTC have announced MOCVD expansion plans in recent months, while Sanan, Osram Opto, HC Semitek and others will also expand in 2018. At the MOCVD shipment peak, 754 reactor chambers shipped in 2010. However, allowing for the greater production capacity of today’s more modern reactors, the actual wafer and die area capacity added in 2018 will be similar to that peak year, say IHS Markit's analysts.
According to its report, while in the last two years, the GaN LED wafer and die surplus has been quite small, capacity utilizations have been high, but in an environment of uncertain demand and falling prices, suppliers were reluctant to make further investments.
Now Chinese companies are once again taking advantage of subsidies to respond to growing demand. Mid-power LEDs in lighting, automotive headlights and signage are among the areas that did well in 2017, and they will continue to grow in 2018 even allowing for the fact that some portion of the announced orders might be cancelled or deferred into the following year.
Hence, IHS Markit expects that over capacity will have a bigger effect on some markets, including lighting, and less on automotive and other markets, where the newer entrants are not qualified and the barrier to entry is much higher.
This IHS Markit forecast takes into account the available GaN LED supply – AMEC and Veeco will likely be working at full capacity, to meet expected higher demand in the coming years. Shipments in 2018 may even be limited by available supply, rather than demand.