Business

Monday July 27, 2009

Barriers to local LED players

By DAVID TAN


Technology and capital among reasons that hinder participation of local manufacturers

GEORGE TOWN: Technological and capital barriers are among the reasons why there are so few local players in the light-emitting diodes (LED) industry today.

Although the manufacturing and technological processes used in LED are very similar to those used in the semiconductor industry, which involve wire and die bonding, only five Malaysian companies are involved in LED.

They are Globetronics Technology Bhd, DSEM Technology Sdn Bhd, Pentamaster Corp Bhd, and Elsoft Research Bhd, all located in Penang, and Dominant Semiconductors Sdn Bhd in Malacca.

They provide support for major multinational corporations (MNCs) involved in the LED business, such as Nichia, Cree, Osram, Lumileds and Avago. Osram, Lumileds and Avago have operations in Penang. It is learnt that Cree Inc, a Nasdaq company, is planning to set up operations in Penang.

But, local semiconductor small and medium-scale industries (SMIs) need to acquire the thermal and optical management technology if they want to tap into the LED application industry, which is expected to generate some US$33bil in global sales in 2013, compared with US$22bil in 2009.

Heng Huck Lee ... High capital entry barrier is not the only important reason

Globetronics chief executive officer Heng Huck Lee said both thermal and optical management were used to dissipate heat effectively and evenly so that high-quality colour lighting would be emitted.

“Too much heat will affect the lighting quality, while poor optical management will affect the colour’s wavelength.

“Thus, high capital entry barrier is not the only important reason,” he said.

Even if the local companies wanted to do only packaging work for LED, they must also have the knowhow to provide packaging with the necessary processes that supported the thermal and optical management system in LED, Heng said.

Globetronics is involved in processing wafers into LED dies for some of the MNCs in the country.

DSEM Technology chief executive officer Davindra Singh Gendeh said high capital barrier was among the reasons few local companies had entered the LED business.

“We are talking about US$3mil to US$4mil investment just to acquire the technology and set up an LED assembly line,” he said.

There were other areas in the LED industry that local SMIs could get involved that required substantially less capital investment, he said.

“They could produce the gold wire used to make the circuits in LED. Or they could produce the silicon lenses or the epoxy, which is used to bind the wafer and dies together. But these areas would also require the know-how to manufacture the gold wire, silicon lenses, and epoxy with the specifications and requirements to support the heat dissipation and optical management processes of the LED,” he said.

Davindra said the current price of LED lighting was still expensive.

“The challenge for LED lighting manufacturers now is how to increase the lumen without increasing the cost,” he added.

DSEM produces high-thermal substrate for LED devices and equipment used in high-power LED for light crystal display and plasma television to produce sharp images.

Elsoft chief executive officer Tan Cheng Eaik said making automated equipment for the LED industry involved different technological skills.

“Our automated equipment manufacturers have the experience of producing material test handlers, as they have been manufacturing such equipment for the semiconductor industry. But the material test handlers used for the LED industry, although they run at a slower speed, require additional functions such as the capability to sort LED into over 120 categories.

“Semiconductor material test handlers are required to sort ICs into three or four categories. Furthermore, LED material test handlers must be able to place LED in an accurate position for testing, as precision positioning is even more critical in the LED industry.

“It will cost about RM2mil to start a business making LED material test handlers,” he said.

The challenge for LED automated equipment today was to produce material test handlers that could test accurately and faster, Tan said.

“Thus local SMIs need to work with LED customers to learn the technology to make material test handlers that suit the needs of the LED industry,” Tan said.

The demand for LED testers and material test handlers has picked up, compared with the first two quarters of 2009.

“As LED technology is now used to make LED display panels, there would be more demand for material test handlers and testers,” he said.

Elsoft’s core business is making testers, designed for testing the quality of LED products, and material test handlers.

“Competition for this market comes from China, Taiwan, Japan and Europe,” he added.

Meanwhile, investPenang general manager Wan Zailena Mohd Noordin said it wanted to establish a LED cluster for Penang. “InvestPenang is now identifying SMIs that have the capabilities to support the needs of the LED industry.

“Once we understand what they are capable of doing, investPenang will match-make them with the MNCs in the LED business operating in Penang that require their services,” she said.

Wan Zailena said investPenang was also identifying the kind of LED support services that were lacking in Penang.

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