UV LEDs High Entry Level Can't Fend Off Hopeful Manufacturers

Several factors have caused manufacturers to flood emerging blue sea markets, such as China’s soon to be implemented 13th five-year plan; drying up LED subsidies; price wars in lighting industry that have resulted in pricing and selling bulbs per kilogram; and industry restructures which have benefited the expansion of big players on the market. SMEs in the industry have been treading on thin ice. When the UV LED emerged as a blue sea market in the LED industry, only a few manufacturers were competing in the market sector. Fast forward to present, manufacturers once standing on the sidelines speculating are starting to jump in. In the near future, it is possible that this niche market might be on the same road as blue LEDs and become another hotly contended red sea market..

Classifying UV LED as a red sea market might be over exaggeration. However, developments in the LED industry this year, have shown growing interest and investments in the UV LED market sector. For instance, Seoul Semiconductor’s acquisition of 50% stake in SETi this year, Chinese manufacturer YuanRong’s acquisition of 85.61% stake in UV LED manufacturer Jason Electric for RMB 109 million (US $17.19 million), and another Chinese UV LED manufacturer has acquired a RMB 60 million loan to finance its expanding business.

UV LED market has grown rapidly from 10 manufacturers in 2008 to 50 manufacturers in 2014. Setting the growth rate aside, there have been several changes in UV LED lighting investments in 2015 including Philips and LG’s entry into the market. The UV LED market is not as uncompetitive as thought, in the future UV LED markets income will be determined by its added value.

High market entry level, technology bottleneck, and low yield rates

Even though there is a bright outlook for the UV LED market, it has a very high market entry barrier. Hongliopto also agreed UV LED has a much higher technology entry level, furthermore it requires special raw materials and packaging technology. In contrast to white lighting technology, it requires special authorization.

Guohua Zhang, Chairman of Qingdao Jason Electric, also made similar remarks that UV LED has a very high entry barrier. The first obstacle is the UV LEDs semiconductor material, followed by epiwafer growth, and the third challenge is LED chip manufacturing and packaging. Qingdao Jason Electric is a subsidiary of Yuanrong Technology.

There is another technology bottleneck during UV LED production. UV LEDs External Quantum Efficiency (EQE) for UV-C applications is just a few percentages, and when it reaches UV-A wavelength is only 40% to 50%. Making a highly efficient UV LED chip will become the main focus in UV LED market developments.

In other words, UV LED efficiency will directly affect UV LEDs market penetration. This will affect UV LED market growth in disinfection and water purification applications, since UVC LEDs currently have insufficient efficiency.

To raise EQE, LED manufacturers will have to improve parameters related to UV LED efficiency, to spur technology development.

More specifically, it will be important for manufacturers to boost EQE, Internal Quantum Efficiency (IQE), and light extraction in UV LEDs. In other words, it could be possible to directly apply flip chip LED chip structures in blue LEDs and optical electronic structure technologies that have been applied to raise LED efficiency onto UV LEDs. There is still an issue, though. UV LEDs exist on In/AlGaN epiwafer layer, and more R&D is required to develop the substrate and crystal growing layer to solve these issues.

In response, Zhang noted UV LED epiwafer growth is much more complicated than blue LEDs. Traditional MOCVDs are unsuitable for growing UV LED epiwafers, so it will be important to understand its growth mechanism and purchase a customized MOCVD or in-house develop MOCVDs. This is also why Jason Electronics has been ahead of other Chinese competitors.

Aside from low lumen output, UV LEDs low efficiency has also sped up organic materials oxidization and deterioration from UV radiation, heat stress, humidity stress and potential introduction of impurities. These presents certain LED packaging issues, since most rely on epoxy resin.

Although, some international manufacturers have started to use glass packaged UV LEDs, organic adhesives and other glue are still present in the LED package. Manufacturers can only reduce the volume of organic materials used in the LED package, but the reduction has reduced lumen output, hygrothermal stress might also trigger inefficiency. The most urgent issue in the UV LED market sector is finding a reliable package process.

The high entry level will make it very difficult for LED manufacturers to grab market share in this sector. Manufacturers trying to enter this market are no longer spending time on R&D, but are seeking suitable partners to acquire. However, only a few manufacturers possess core technologies in this market application, and it will be difficult to acquire these companies. Manufacturers have had to turn their attention to core technologies in slightly weaker application sectors.

Market competition to become centered around diversifying added value, and application market

UV curing technology first emerged in 1960s, and manufacturers have applied it in many markets from printing to coatings in car headlights and more. Currently, 90% of UV LED market applications have been mostly focused in the 365nm to 405 nm wavelength market, where it is mostly used in UV curing. However, UV curing market has continued to grow, mainly because it can replace water based products and solvents to raise LED production capacity, and optimize product quality and features. The products are also more environmental.

UV LED equipment technology advancements has contributed to soaring market growth, for instance the gradual transition from mercury lamps to UV LEDs. According to a research organization, the expanding UV LED market has jumped from US$ 20 million in 2008 to US $90 million by 2014, with Compound Annual Growth Rates reaching 28.5%.

UV LED curing will maintain its leading position in printing, adhesives, and coating industries. There has also been significant growth in the sterilization market, and is being widely applied in water purification. Many manufacturers have been focused on UV LED purification applications, which has led technology development and achieved certain cost benefits. Some manufacturers have been able to achieve this, such as American UV LED manufacturer SETi, whose largest shareholder is Seoul Semiconductor, two other U.S. manufacturers CrystalIS, Aquionics, Trojan in Canada, Denmark’s LiqTech and YuanRong under Qingdao Jason Electronics.

In response to this, an industry market research company projected UV LED business might balloon from US $90 million in 2014 to US $520 million by 2019. If UV LEDs take into account general lighting, garden lighting, medical equipment, hospital sterilization, and other new market applications, than it might have even greater market potential. These new market applications have not created a big impact on the market yet, and are expected to account for nearly 10% of the UV LED market by 2019.

Aside from sterilization applications, UV LEDs have also been applied in deodorization, forensics, detecting counterfeit money and other applications. All these are aimed at ensuringenvironment safety and effective deodorization .

As for UV LED application market outlook, Yuanrong Photoelectric Chairman Xudong Liang’s acquisition of Jason Electric revealed a thing or two about the company’s future development strategy and company health. In the future UV LED market will not only solely belong to upstream LED manufacturers holding onto core technologies, but might also extend to downstream applications aimed to tap into UV LEDs infinite market potential.

(Author: Skavy Cheng, Editor, LEDinside// Translator: Judy Lin, Chief Editor, LEDinside)

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