Vertical Divider
The Inevitable – Veeco Order Shifted to Chinese Vendor?
February 03, 2018 On December 6, 2017 Chinese LED and lighting products producer Focus Lighting Technology (300708.CH) signed a deal with US based Veeco (VECO) for ~$70m worth of MOCVD tools. In May 2017, Veeco had filed a patent infringement suit against SGL Carbon that was focused on the graphite wafer carriers used in MOCVD tools. Veeco alleged that its patents cover the use of certain wafer carrier designs that are being infringed by SGL and has asked that SGL immediately stop selling those products that infringe and compensate Veeco for loss suffered. Given that there are only three suppliers of such graphite components, SGL, Toyo Sanso and Xycarb, the injunction (and subsequent challenge) granted by the US District Court for the Eastern District of New York made it impossible for AMEC (Advanced Micro-Fabrication Equipment), a Chinese MOCVD tool vendor that used a system similar to Veeco’s, to sell its tools without the needed wafer carriers and Veeco IP license. However, things were a bit different in China, where Veeco also challenged the validity of patents being used by AMEC. Veeco was able to get the Beijing Patent Reexamination Board to limit the scope of the AMEC patent in question, but they were unable to convince the Chinese court to invalidate the Chinese patent overall, which Veeco alleged claims technology that was disclosed and widely used before the Chinese patent application date, according to the suit. AMEC has not been sitting still idle during the battle in the US and filed a motion in Fujian High Court in China asking for an injunction against the importation of any Veeco product that would infringe on AMEC’s patent for wafer carriers, which it claims is covered under its 2012 local filing (CN202492576), which is titled “A chemical vapor deposition device”. The court granted AMEC’s motion only days after the deal with Focus Lighting was announced, and issued an injunction which prohibits Veeco from selling its TurboDisk EPIK 700 system, EPIK 700 C2 system, and EPIK 700 C4 system, as well as the related wafer carriers used in the MOCVD systems and AMEC believes that the ruling should also cover Veeco’s EPIK 868 system and related wafer carriers, since AMEC believes that the EPIK 868 system also uses AMEC’s patented technology. According to AMEC, the ruling is unappealable According to Veeco, the Chinese injunction does not apply to Veeco EPIK 700 MOCVD systems previously sold in China and does not cover EPIK 868 systems, which were the systems ordered by Focus. Veeco is working on potential design changes to circumvent the IP issue for its Shanghai branch, which accounted for ~12% of Veeco’s revenue in 3Q, but the EPIK 868, which was released earlier this year, seems to be the MOCVD tool of choice in China most recently, as it is designed for multiple chamber configurations. If Veeco has lost the order from Focus to its Chinese rival, it will make what could have been potential negotiations between the parties a far more difficult issue, and with much of the LED MOCVD tool growth expected to be coming from China, there could be significant pressure on Chinese LED producers, who receive subsidies from the state and local governments, to honor the injunction and use AMEC tools despite their historic use of non-Chinese MOCVD tool vendors. Figure 1: MOCVD Wafer Carrier Source: Xycarb
San’an Optoelectronics, the largest China-based LED epitaxial wafer and chip manufacturer, has lowered prices for LED chips, by 20% for 2835 models used in lighting products. HC SemiTek, the second largest China-based LED epitaxial wafer and chip manufacturer ahs also reduced prices. With two giant makers reducing prices will definitely impact the smaller competitors, who struggle to meet up to the prices of the major players. This price cut may compel some of the players to leave the market. However, Taiwan-based competitor Epistar has not reduced prices, instead it has declined orders coming with low quotes. According to industry sources, the latest price cuts are yet to have any impact on the market, and have not yet push up demand for LED chips, as the market is still waiting for further reductions. According to market analysts, LED prices are likely to drop further in first quarter 2018. Despite the price cuts, San’an will capitalize on the China government’s subsidies for equipment used for producing III-V compound semiconductors, as it is setting up a production base in Guangzhou, southeastern China, with an investment of US$ 5.03 billion. The facility will manufacture GaN substrates, epitaxial wafers and chips, etc., and production will most probably start from 2022. |
|
Contact Us
|
Barry Young
|