The supply of sapphire substrates will not be affected by the Japan earthquake as the facilities of the top-2 Japan-based makers - Kyocera and Namiki - were not damaged by the quake, according to Lee Biing-jye, chairman of Taiwan-based LED chipmaker Epistar.
Kyocera and Namiki account for roughly 20% of the worldwide sapphire substrate market. The two companies and Epistar have sufficient inventory at the moment since January and February were the LED sector's off season, Lee pointed out.
Namiki, a supplier of Epistar, is located in Akita Prefecture and could experience shipment delay due to power outages, but normal operation should resume soon. Epistar expects no sapphire substrate shortages in the short run.
In regards to sapphire substrate price movements after the earthquake, Lee noted that companies are still in talks about second-quarter quotes, but long-term trend is downwards as supply and demand become more balanced in 2011.
Though the LED supply chain is relatively unscathed, situations in the LCD panel sector are less transparent, Lee said. Demand for backlight applications could slow since several anisotropic conductive film (ACF) plants in Japan have sustained damage. Facilities under Hitachi and Sony represent 70% of the global ACF supply. If upstream material becomes tight, LED chip shipments for backlight applications could take a hit.
Hitachi Chemical controls 50% of the ACF market worldwide and its main manufacturing base in Ibaraki Prefecture is within the earthquake disaster area. Hitachi Chemical supplies more than 40% of ACF used by panel makers Samsung Electronics, LG Display, AU Optronics (AUO), Chimei Innolux (CMI) and Sharp, according to industry sources.
LCD backlight applications constitute 55% of Epistar's revenues and about 60% of the global LED market, Lee said. LED TV market penetration will rise to 49% in 2011 and 65% in 2012, meaning the backlight sector will remain as the main revenue source for the LED industry, he added. .
However, the projections were made prior to the Japan earthquake, and future developments of the LED industry depend on whether there are lingering effects from the disaster, Lee said.
In downstream LED chip packaging, Dow Corning and Shin-Etsu are the main suppliers of packaging silicone, the sources said. Shin-Etsu's plant in Gunma Prefecture is hampered by power blackouts and transportation issues. Some LED chip packaging houses have confirmed tight silicone supply.
As for phosphors, Mitsubishi Chemical is a major producer of red and green phosphors. Production at its Odawara City facility is also disrupted due electricity shortage, the sources noted.