Chinese Sapphire Substrates for LED Stock Prices to Continue Upward Climb or Eventually Cool Down?

News Source: 
China Securities Journal (中國證券報)

Sapphire substrate concept stocks have soared lately on China’s A-Shares market, but major international sapphire substrate suppliers stock prices have plunged, according to a China Securities Journal article. Out of the major sapphire substrate manufacturers, U.S. company GT Advanced Technology (GTAT) stock prices were down 10 percent over the last three days, another U.S. company Rubicon also fell 7 percent during the same period, while Korean Sapphire Technology Company has dropped 8 percent over the last five days.

Previously, sapphire substrate concept stock prices upward price climb was spurred by benefits from obvious demand growths. However, some financial analysts believe the initial benefits have been exhausted and investors will now shift towards profit taking, which will lead to readjustments of related companies’ stock prices resulting in price drops. Whether future stock prices will continue the upward trend will require actual support from product sales. Although, sapphire substrate concept stocks delivered strong performances on China’s A-Stock market, Chinese manufacturers have only controlled sapphire substrate production technology, and will not be entering the later home button or smartphone cover technologies. In addition, China still has serious sapphire substrates oversupply issues. With oversea sapphire substrate concept stock price declining, the warning bell has been sounded for the Chinese market.

Sapphire substrate stocks exhausted after explosive growth

An earlier report claimed Apple is considering incorporating sapphire substrate monitors in its new iPhone next year. Apple has also recently announced the signing of a long term sapphire substrate order and investment in GTAT. Those in the industry noted, as traditional LED demands grow so has smartphone markets sapphire substrate demands, which has eased the oversupply of sapphire ingots over the last few years. 

Sapphire substrate suppliers stock prices have shown stellar performance this year, spurred by rapid demand rises. In the U.S. stock market, sapphire substrate supplier and sapphire ingot growth system manufacturer GTAT stock prices doubled, with growth rates hitting 200 percent. The largest U.S. sapphire ingot manufacturer Rubicon has also seen stock prices soar 50 percent.

However, after a period of explosive growth, international sapphire substrate suppliers stock prices began to wane in mid Nov. 2013, and the decline has been especially evident over the past week. GTAT stock prices dropped 3.88 percent on Dec. 4, 2013, and has accumulated 10 percent fall over the last three days.  The company’s current stock prices have depreciated 15 percent compared to Nov. 13, which marks a historical high over the last two years for the company. Rubicon’s stock prices were also down 2.8 percent on Dec. 4, and have accumulated a loss of 7 percent over the last three days. The company stocks have lost 30 percent of its value compared to the historical annual high prices during late Sept this year. In the Korean stock market, one of the globe’s largest sapphire substrate manufacturers Sapphire Technology stock prices dropped eight percent over the last five days. The company’s current stock prices are down 30 percent compared to the high point in mid October.

Analysts believe drop in company stock prices have been caused by the consumption of initial benefits and investors move towards profit-taking strategies. Whether stock prices can continue its upward hike will rely on sales performance. 

Sapphire substrate stocks on the A-stock to continue hot trend or meet a “cold end”

China’s A-stock’s recent sapphire substrate fab has been largely stimulated by oversea market information. Chinese companies including Zhejiang East Crystal Electronic Co.,Ltd., TDG HOLDING CO.,LTD,  Jinsheng, Tanlong Photoelectronic, CMC Magnetics Corp., San’an Optoelectronics and other company stock prices have all soared as a result.

However, analysts were quick to point out it is questionable as to whether these companies can maintain growth. Since effect from initial good news has exhausted, Chinese sapphire substrate manufacturers lack of technology to enter the home button and smartphone cover market, and oversupply of Chinese sapphire substrates. Overseas sapphire substrate concept stocks have already lowered prices, or shown signs of profit-taking. Investors should show more caution in later market investments.

According to industry insiders, LED applications still take up the largest share in sapphire substrate applications. According to LEDinside statistics, sapphire substrate applications for LED will account for 84 percent of applications. Current sapphire substrate for LED application crystal growth methods includes Czochralski method, Heat Exchanger Method (HEM), Kyropoulos method, Vertical-Horizontal Gradient Freezing (VHGF) and AHCG methods. Chinese TDG HOLDING CO., Zhejiang East Crystal Electronic Co. and San’an Optoelectronics use Kyropoulos method to manufacture sapphire substrates, but as the substrate’s size and thickness increases, the yield rates also falls considerably. Therefore, this method is only suitable in making sapphire substrates for LEDs, and unsuitable in making Apple smartphones home buttons and potential smartphone monitors in the future.

In addition, China’s sapphire substrate oversupply quagmire remains difficult to solve. After massive expansions in Chinese 2-inch sapphire substrates over the last few years, annual production capacity has surpassed 300 million pcs. Estimations place global 2013 LED sapphire substrate demands at 76.52 million pcs, in other words potential production capacity is nearly four times of that of annual global demands. At the same time, sapphire substrate also faces competition from Gan-on-Si substrates. Toshiba and Bridgelux partnership in developing Gan-on-Si LED chips entered mass production in Oct. 2013. Once Gan-on-Si yield rates are raised to the same levels as sapphire substrate, sapphire substrates will be facing tougher competition as the former technology has lower costs and comes in larger sizes. 

Those in the industry also noted, there is still some distance between Chinese and Taiwanese substrate manufacturers in terms of substrate’s added value. At the moment, China’s sapphire substrates are still focused on common substrate manufacturing, while San’an Opto and others are testing waters in Partially Patterned Sapphire (PPS) substrates. However, these companies still need to make breakthroughs in technology and yield rates.  

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