South Korea's LED supply chain relies on Japan's Kyocera and Namiki for sapphire substrates, and Nichia and Toyoda Gosei for epitaxial wafers, chip packaging and LED phosphor materials.Among the Japan-based companies, Namiki was hit the hardest by the recent earthquake offshore of Japan. Nichia and Toyoda Gosei were relatively unscathed.In sapphire substrates, South Korea's Sapphire Technology Company (STC) and Astek already have ingot production and slicing capability. Iljin Display and Hansol Technics (formerly Hansol LCD) also have ingot slicing operations. With Hansol Technics and LG Siltron expanding to upstream sapphire substrates since 2010, South Korea has become less reliant on overseas supply sources. Hence Namiki's production disruption should have little impact on South Korea's LED industry.Additionally, as STC now has the world's largest capacity for LED-use sapphire substrates, Namiki's share of the South Korea LED market has been down for quite some time.As for MOCVD equipment, South Korea LED chipmakers mainly rely on Germany's Aixtron and US-based Veeco, and hence, the earthquake has not affected equipment supply to the country. From epitaxial wafers to chip packaging, South Korea has sufficient capacity within the country, plus Nichia and Toyoda Gosei sustained only minor damages.However, South Korea still needs to improve its own capacity in phosphor material production. Though, as mentioned, Nichia and Toyoda did not sustain serious damages, shipments from Japan to South Korea could be impacted by air and sea traffic delays. Overseas and domestic suppliers of South Korea LED supply chain South Korea Overseas MOCVD equipment AP System, Top Engineering, Juseng Engineering Aixtron, Veeco Phosphor materials Force4, Daejoo Electronic Materials Nichia, Toyoda Gosei, Osram Sapphire substrates STC, Astek, Iljin Display, Hansol Technics Rubicon, Monocrystal, Kyocera, Namiki Epitaxial wafers Samsung LED, LG Innotek, Seoul Optodevice, EpiValley Nichia, Toyoda Gosei, Cree, Osram, Philips Lumileds, Epistar LED chip Samsung LED, LG Innotek, Seoul Optodevice, EpiValley Nichia, Toyoda Gosei, Cree, Osram, Philips Lumileds, Epistar Chip packaging Samsung LED, LG Innotek, Seoul Semiconductor, Alti-Electronics Nichia, Toyoda Gosei, Cree, Osram, Philips Lumileds Source: Companies, compiled by Digitimes, March 2011

Areas affected by Japan's March 11 earthquake, aftershocks and the quake-triggered tsunamis include the prefectures of Fukushima, Miyagi, Aomori, Yamagata, Iwate and Akita.Not to mention its focus on the development of agriculture and tourism, northeast Japan is also considered one of the nation's major manufacturing locations. Several of Japan's major semiconductor companies locate their manufacturing spots in the northeast prefectures, for example, Toshiba's 8-inch wafer fab in Iwate, Renesas Electronics' factories in Aomori, Hokkaido and Yamagata, Elpida Memory's backend manufacturing facility in Akita and Fujitsu's plants in Fukushima.Disruptions in transportation and power infrastructure will inevitably have a certain degree of impact on chip companies. Moreover, there is also concern about supply constraints for upstream materials.With its major production hub in Nishigo Village of Fukushima, a prefecture close to the epicenter of the earthquake, Shin-Etsu Handotai (SEH) is expected to suffer significantly from the impact. SEH is still unable to disclose when normal operations at the facilities can be resumed.SEH's Shirakawa plant, Fukushima Prefecture, produced about 22% of total silicon wafer demand in the world in 2010. Monthly capacity at the plant reaches as high as 800,000 12-inch wafers, accounting for more than 60% of SEH's overall production capacity of 1.2 million units.Many chipmakers have claimed that they are capable of activating alternatives if necessary. In addition, wafer inventory among companies remains at a sufficient level of two to three months. However, if SEH's supplies cannot return to normal over a longer period of time, the semiconductor market will struggle with wafer shortage issues later in the year.In 2010, Japan's semiconductor industry generated sales of US$44.6 billion, up 16.4% from 2009 levels. The growth also represented a recovery for the sector following two years of sales drops. Japan accounted for 15.9% of total semiconductor revenues worldwide in 2010, compared to 16.9% in 2009 and 19.5% in 2008. Japan top-5 semiconductor companies: Revenues and worldwide ranking, 2009-2010 (US$m) 2010 Japan rank Company 2010 revenues 2009 revenues Y/Y 2010 WW rank 2009 WW rank 1 Toshiba 13,081 10,319 26.8% 3 3 2 Renesas 11,840 5,153 129.8% 5 9 3 Elpida 5,678 3,948 74.2% 10 15 4 Sony 5,336 4,468 19.4% 14 10 5 Panasonic 5,128 3,243 58.1% 15 18 Source: Digitimes Research, compiled by Digitimes, March 2011Source: Digitimes Research, compiled by Digitimes, March 2011Source: Digitimes Research, compiled by Digitimes, March 2011

LED players in Japan have been spared major impacts from the March 11 massive earthquake and tsunami that hit the country, as their plants are mostly far away from the stricken areas. With Japan not having a high market share in the LED industry, the global LED supply chain is not expected to be much affected, according to Digitimes Research.Japan-based players whose plants did feel some impact from the quake include Taiyo Nippon Sanso, Namiki Precision Jewel, Showa Denko and Citizen Electronics.Taiyo Nippon Sanso, which produces MOCVD machinery, only had a 2.5% share of the global market in 2010, and therefore any possible impact on its production would have little effect on the global MOCVD supply, Digitimes Research said.Sapphire suppliers Kyocera and Namiki are expected to have a combined global market share of 15.4% in 2011. Kyocera's plants were only rocked mildly by the quake, while Namiki was only affected by power outages with its facilities all remaining intact.Global sapphire supply is unlikely to see major impacts, but prices may stop falling, Digitimes Research said. Japan LED supply chain Sector Company Quake impact MOCVD Taiyo Nippon Sanso Only had 2.5% of global market in 2010 Sapphire Kyocera Sapphire facilities not affected; ranked 5th globally Namiki Affected by power outage; facilities intact; ranked 6th globally LED chip Nichia Facilities far from quake areas; supply unlikely to be affected Toyoda Gosei Facilities far from quake areas; supply unlikely to be affected Showa Denko Facilities near quake areas, but not hit with power outage; it only supplies to specific clients Citizen Electronics Facilities near quake areas; affected by power outage Source: Digitimes Research, March 11Source: Digitimes Research, March 2011Source: Digitimes Research, March 2011Source: Digitimes Research, March 2011

While the massive tremor that ravaged the northeastern part of Japan did not cause damage to Japan's major production sites for DRAM and flash memory products, it may disrupt the supply of some key materials for the global semiconductor industry.Elpida Memory's DRAM plant in Hiroshima and Toshiba's flash memory plant in Yokkaichi (Mie prefecture) escaped the slam of the devastating quake, but silicon wafer maker Shin-Etsu Handotai (SEH) was not so lucky.SEH's main silicon wafer plant (the Shirakawa plant) is located in Nishigo Village of Fukushima, a prefecture close to the epicenter of the earthquake. SEH has shut down the plant due to a lack of electricity.Although SEH has expanded the number of its production bases for silicon wafers to four in order to reduce its operation risks, the Shirikawa plant remains the most important production base for SEH. SEH has a production capacity of 1.2 million units of 12-inch wafers a month, of which 800,000 are produced at the Shirakawa plant, accounting for a 22% global share.With most wafer foundry houses normally keeping a certain amount of inventory, a two-week suspension at the Shirikawa plant may not trigger a supply problem for silicon wafers. However, if it takes two months or even longer for the Shirikawa plant to resume normal production, it will become a major problem for global wafer shipments.

Japan-based Hitachi on March 7 announced that it has sold subsidiary Hitachi Global Storage Technologies (HGST), a top three hard disk drive (HDD) maker globally, to Western Digital (WD) for US$4.3 billion, which includes 25 million WD shares worth about US$750 million.Since Toshiba acquired Fujitsu's HDD operation in April 2009, the industry has consolidated into five main players - WD, Seagate, HGST, Toshiba and Samsung Electronics. The top two companies, WD and Seagate, were separated by less than one percentage point in market share. With the latest HGST acquisition, WD is looking to widen its lead over the rest of the field.Hitachi's quick decision and sudden change of heart stunned the market. In November 2010 when the company released results for the fiscal second quarter, it pointed out that HGST had improved financially and was scheduled to be listed on NASDAQ. In just a few months, Hitachi has changed plans, which could be an indication that the HDD industry is indeed seeing stronger-than-expected threats from SSD and cloud computing technologies.

Sony in February announced 24.5-inch and 16.5-inch OLED display monitors priced at JPY2.42 million (about US$30,000) and JPY1.31 million, respectively. Their targets are professional users such as TV stations and movie production houses.So far Sony has unveiled four OLED products. Besides the 11-inch OLED TV, which had already been phased out, the other three are monitors for the professional segment.The price gap between OLED TV and LCD TV is too wide to generate consumer interest. The smaller screen and shorter product life are also issues that need to be overcome. The professional segment on the other hand is less concerned about size. Its main requirement is video quality and image authenticity. Furthermore, the price gap between professional-level LCD and OLED products are comparatively smaller, and therefore Sony has placed more emphasis on developing the professional segment for OLED.South Korea's Samsung Electronics and LG Electronics are in less hurry to commercialize large-size OLED solutions. LG introduced a 15-inch OLED TV in 2009, and Samsung's OLED TV is still in test production.Though Samsung and LG are less aggressive in new product launch, they are very active in research and equipment investments. LG Display recently announced that it will have the capability to mass produce 30-inch OLED TV panels by year's end, and Samsung is scheduled to begin test production of 32-inch OLED TV in the second half of 2012.In regards to 8G OLED panel facilities, LG Display said that it will have 8G volume production capability in 2011, and Samsung Mobile Display will begin to invest in 8G lines in the third quarter.

Sony Ericsson saw revenues in the fourth quarter of 2010 fall 4.7% sequentially to EUR1.53 billion (US$2.12 billion). Revenues for 2010 came to EUR6.29 billion versus EUR6.79 billion in 2009. Europe, Middle East and Africa (EMEA) are the company's largest revenue source, but the three markets also combined for the largest sales drop off.To curb operating expenditure, Sony Ericsson let go 4,000 employees amid a corporate restructure. Its operating expenditure in 2010 was down 16.4% compared with 2009.Sony Ericsson shipped 43.1 million units in 2010. Its Xperia X10 generated strong sales in Europe and Japan, but the rest of the Xperia series failed to achieve the same success.However, its strategy to target the high-end segment successfully raised ASP to EUR146, up EUR27 from the previous year. The company returned to profitability in the first quarter of 2010 and has remained in the black since.The future of Sony Ericsson will depend on its strategy for the high-end segment moving forward to maintain profit margin, and whether the company can increase shipments in the US, which is traditionally its weakness, to raise market share.

As global penetration of LED TV's increases and LEDs get ready to take the lighting sector by storm, global demand for metal organic chemical vapor deposition (MOCVD) has been increasingly markedly since 2010, according to a recently published DIGITIMES Research Special Report titled "Survey of upstream LED component industry." The report notes that global demand for MOCVD equipment increased by a staggering 277%, from 212 units in 2009 to around 800 units in 2010. DIGITIMES Research explained that the main reason behind this is that LED manufacturers in regions of Asia such as South Korea, Taiwan and China are actively expanding MOCVD equipment capacity. Over the last two decades, LEDs have gone from obscure components to indispensable parts of everyday life. Today, everything from computer and TV screens to household lighting and even car parts contains LEDs, and this increase in demand is driving a boom in upstream components, materials and equipment for the LED sector. The most critical of these are LED components themselves, chiefly chips and packaging; the artificial sapphire materials from which key LED components are made; and the MOCVD equipment (reactors) used in their manufacture. In the context of this booming demand, a sea change is taking place within these industries. World leaders in sapphire production such as US-based Rubicon are expanding capacity while focusing on profitability. The traditionally strong Japan-based manufacturers such as Toyoda Gosei and Nichia are facing new challenges from increasingly technically sophisticated and commercially ambitious competitors based in Taiwan and South Korea; while the Taiwan and Korea-based manufacturers are expanding capacity and developing their own technologies, with government assistance in some cases. Moreover, a new wave of China-based companies is emerging, many of which will find themselves ideally placed to capitalize on the LED boom, as a result of the government subsidies they are receiving, and their undeniable advantages in terms of labor costs and proximity to customers. The LED industry recovered quickly from the recent global financial crisis, but has also faced challenges from recessions around the world, and rising prices of vital rare earth materials, further complicating the picture. The DIGITIMES Research Special Report brings together all these complex threads, providing an understanding of the key issues and major players that are reshaping the upstream LED industry. The report provides a clear overview of the industry and forthcoming trends on both a company-by-company and region-by-region basis, accompanied by a wealth of easy-to-read charts, useful data and incisive analysis. Source: Digitimes Research, February 2011 For more information about the reportAbout DIGITIMES Research DIGITIMES Research is the research arm of DIGITIMES Inc., Taiwan's leading high-tech media outlet. Operating as an independent business unit, DIGITIMES Research focuses on monitoring key high-tech industries, while also guiding clients toward suitable new business as well. Market intelligence and analysis is provided to more than 1,000 corporate customers worldwide. Research and consulting services cover a full range of industries, including information and communications technology (ICT), flat panel display (FPD), renewable energy and semiconductor design and manufacturing. Contacts: Michael McManus (Michael.mcmanus@digitimes.com) Shannen Yang (Shannen.yang@digitmes.com)

Tablet PCs were the main attractions at this year's CES and MWC. Though smartphone and computer vendors introduced their latest tablet PC at the exhibitions, Apple, the company that brought tablet PCs to the forefront, did not unveil the next generation iPad until March 2.The iPad 2 made improvements in industrial design, hardware and operating system, and is also priced competitively like its predecessor. Sales for the iPad and iPad 2 are projected to combine for more than 35 million units in 2011.iPad users in 2010 were mainly business professionals, which was a small market. Since the business segment is expected to see more competition from other tablet PC such as RIM's PlayBook, the iPad 2 aims to open up the consumer segment. At the launch press conference, Apple focused on the iPad's multimedia entertainment capabilities such as iMovies. The iPad 2 also includes outer covers to create color differentiations similar to that of the iPod music player.Sales of the iPad 2 in the consumer market will determine whether Apple will ship more than 40 million tablet PC in 2011 and grab a 70% share of the global market.

Founded in April 2009, Samsung LED has become Samsung Electronics' main LED supplier in LED TV backlight applications. Samsung LED is aggressively expanding its MOCVD capacity and up until the second quarter of 2010, it had maintained revenue growth.Samsung LED has remained as South Korea's largest LED company since 2009. Its 2010 revenues reached 1.32 trillion won (US$1.2 billion) to become South Korea's first LED company to surpass the 1 trillion revenue mark.Though Samsung LED will continue to focus mainly on TV backlight applications in 2011, it expects LED lighting to contribute about 25% of revenues. The company will place more resources on the lighting market since it saw revenues began to decline in the second half of 2010 with TV vendors looking to lower inventory.