The capacity growth is driven mainly by new MOCVD installation and partially by migration to larger substrate sizes. Specifically, new reactors have doubled the capacity compared to earlier models that were available on the market not too long ago, further boosting the capacity growth rate. Regarding the size of substrate, the report expects the 4" substrate to be the mainstream production size in 2015, surpassing 2" substrates, while 6" substrates are also gaining more share at Tier 1 and Tier 2 manufacturers. However, 8" GaN-on-Si capacity will still be limited to a handful of suppliers in the foreseeable future.
Looking at the trend in LED epitaxy and chip process equipment spending, there is a major difference between the 2011 investment spree and 2015. Back in 2011, almost all regions were boosting their capital expenditure as they tried to seize a bigger share of the market. Overall investment into LED front-end facilities reached a staggering US$2.7 billion worldwide in 2011, with China representing about 46% of that.
However, that also resulted in oversupply and consequently a slowdown in the LED equipment market afterwards. In contrast, the investment recovery in 2015 seems much more disciplined, with only China expecting to see big growth over 2014. Total equipment spending is forecasted to reach US$1.35 billion in 2015, followed by a correction in 2016 to US$1 billion. China will contribute over 50% global investment in 2015 and 2016. Some of the expansions in China are also from Taiwanese LED light suppliers.