The flip-chip LED market is booming and Nichia will launch new products in October

When Nichia announced more than a month ago that it would officially launch its latest flip chip LED product (Flip Chip LED) in October this year, everyone was a little surprised for two reasons.

First: Flip-chip LED was first launched on the market by Philips in 2007. It has been nearly 8 years ago. During this period, many manufacturers have participated, including Samsung LED, LG Innotek, Cree, Toyoda Gosei, Taiwanese New Century Optoelectronics, Epistar Optoelectronics, Lextar Electronics, etc. Nichia has only announced its investment now. Isn’t it afraid of lagging behind its competitors in technology and market?

Second: In the past year or two, in addition to the active investment of Taiwanese manufacturers, even mainland manufacturers (such as Huacan Optoelectronics, Dehao Runda, Jinko Electronics, Sanan Optoelectronics, etc.) have also rushed in. Japanese manufacturers have never been good at low-price competition. How can Nichia maintain its price competitive advantage?

In fact, if you look back at the development history of flip-chip LED, you will find that Nichia entered the market in 2015 at a very good time. There is no problem of entering the market too late. Many market data show that the application and market of flip-chip LEDs have just begun to take off in the past two years, and by 2015, the market will enter a period of rapid growth. As shown in Figure 1, a report by French market research agency Yole Development shows that flip-chip LED accounted for only 11% of all LED chip shipments in 2013, and jumped to 15% in 2014. It is estimated that the market share will increase significantly to 32% by 2019, challenging the market position of traditional vertical LED chips. In addition, market analysts also predict that the market size of flip-chip LED will grow from US$1.5 billion in 2013 to US$5.5 billion in 2017. It can be seen that the market demand for flip-chip LEDs will become more and more prosperous starting from this year.

Figure 1. High-power LED market share - MESA LED vs. Vertical LED vs. Flip-chip LED

Flip-chip LED has many benefits but the market is slow

Compared with traditional wired LEDs, flip-chip LEDs have many advantages, including about 2 times more light output than traditional LEDs, direct contact with the heat dissipation structure in the package structure through electrodes/bumps, greatly improving heat dissipation, eliminating the need for wiring and lead frame processes, and being able to be driven at high currents. For industry players, they are very cost-effective.

Since flip-chip LEDs have many benefits, and products have been on the market as early as 2007, why have the market and applications never really "taken off"? Zhang Ruiming, director of Japanese precision processing equipment agent Chunichi Precision, believes that most manufacturers will choose to follow the mainstream route. When 99% of manufacturers use traditional face up, they will not do anything different from others unless there is a special application or demand.

Sino-Japanese Precision has been an agent of Japanese DISCO’s LED cutting equipment for a long time, and has a deep understanding of the development of the LED industry. Regarding the rapid development of flip-chip LED and the large amount of industry investment in the past two years, Zhang Ruiming believes that it is due to market demand: "The industry should have seen that the current formal products have come to an end, which means that the brightness has reached the limit. But the problem is that the entire market's requirements for LEDs are still brighter and cheaper; the requirement is lumens/USD That is, the price is the same, but the performance is brighter. From the current situation of the entire industry, flip-chip LED should be the only way out. "

Usually the brightness of the LED can be determined in two stages: one stage is when making each chip, how bright will it be? Another stage is after packaging, how bright will it be? The "brightness has reached the limit" mentioned by Zhang Ruiming means that the brightness at the chip stage has approached saturation, and the increase in brightness has slowed down significantly, which is much different from the increase rate in previous years.

However, as far as downstream LED packaging factories are concerned, chip factories will definitely be required to provide them with brighter chips at the same price, that is, the cost-effectiveness must continue to improve. In this case, chip manufacturers will begin to review the existing packaging methods. The most widely used is MESA, followed by vertical packaging, and then flip-chip. From the overall cost and performance, when other packaging methods have reached a bottleneck, flip-chip becomes the only way out.

Zhang Ruiming pointed out that the obvious disadvantage of flip-chip LED is that the cost is higher than that of traditional formal LED. The main reason is that the production of flip-chip has not yet reached an economic scale, so the price naturally remains high. The customers of the chip factory are the downstream LED packaging factories. When the downstream packaging factories do not pay the bill and the production cost is higher than that of traditional formal LEDs, the chip factory will certainly not take the initiative to promote it. However, manufacturers ultimately want to find solutions with better cost performance, and chip manufacturers also know that this is the only way out, so they will inevitably invest one after another.

In addition to the high production cost due to the small quantity, the manufacturing process of flip-chip LED is more complicated than that of traditional formal LED, and more photomasks are required, which are reflected in the production cost. However, Zhang Ruiming pointed out that basically 80% to 90% of production equipment can be shared with the formal LED manufacturing process. For example, the most expensive machine, MOCVD, can basically be used on the same machine.

Competition of LED chip factories

The industrial structures of the LED industry and the semiconductor industry are very different. The semiconductor industry has high front-end barriers (such as wafer manufacturing), but it is also relatively profitable; while LED has high front-end technology barriers, but is not very profitable. The ones who make money are the back-end LED packaging plants. If you compare the EPS of listed LED chip manufacturers and LED packaging manufacturers, it will be clear at a glance that this is a very abnormal ecosystem. Therefore, South Korea's Samsung has also decided to focus on the back-end LED packaging, sending all orders for chip production overseas, and only retaining about 30% of its production capacity.

Zhang Ruiming said that chip factories were not that competitive in the first place, but since mainland chip factories started production, the market competition has become fierce. For example, the number of chips produced by Sanan Optoelectronics, the largest photovoltaic factory in mainland China, is very large, and it can price based on quantity to conquer the market.

Zhang Ruiming believes that the craze for flip-chip LED will continue. In addition to the current shipments of several Taiwanese manufacturers such as Epistar, Lextar, etc., which are continuing to rise, mainland manufacturers such as Jinko Electronics and Dehao Runda have also successively opened up production capacity, indicating that the acceptance of downstream manufacturers is not low. However, there are still some areas that need to be overcome in flip-chip LED technology, such as the problem of current leakage.