- Jun 15, 2017 -
Korea’s LED industry took off at a much later date than Japan or Taiwan, in fact it developed at around the same time as China, but has advanced at an accelerated rate. However, the country’s LED industry plummeted much sharply compared to Japan, China and Taiwan. The Korean LED industry development occurred in three phases the first was started by upstream LED manufacturers EE coined the “double E era”, followed by Samsung and LG’s entry during the peak of the Solid State Lighting (SSL) phase, followed by large scale withdraw from the market, in response to emerging Chinese LED industry.
Double E period
The EE period refers to the earliest Korean LED manufacturers to enter the market Epivalley and Epiplus, most of the Korea’s LED technology when it first started was from Japan. Koreans that studied in Japan would bring back LED and MOCVD technology they learned from Japan for mass production using Aixtron or Veeco MOCVD equipment. Additionally, since most LED manufacturers clients at the time were large international manufacturers including Samsung or LG, Korean LED companies encountered many issues in avoiding patent infringement and large limitations on their LED EPI-wafer and chip technology.
Korean LED manufacturers technology lagged far behind Chinese and Taiwanese manufacturers, and was still following in their footsteps at this point. This was about 10 years ago, when LED chip manufacturers could profit from selling low spec chips to Korea, and most of their LED supply was to Epivalley and Epiplus. Taiwanese manufacturers were still in the lead compared to the two Korean manufacturers, but the Korean companies outshone Chinese companies. Initially many Chinese manufacturers in the upstream sector of the LED industry collaborated with the two Korean companies.
The introduction of Patterned Sapphire Substrate (PSS) after 2008, resulted in the maturation of LED technology. Epivally’s parent company Jusung Engineering also completed its MOCVD design, and sold its patent technology to a large Chinese manufacturer presumably ETI, making a huge profit from the business transaction. The top three largest SSL manufacturers investments in large backlight displays and growing demands resulted in escalating investments in their LED businesses, which increased talents, employee costs, and other large scale developments that impacted their businesses and accelerated its demise. Once the two early Korean LED makers achieved their missions, they gradually disappeared from the market.
The SSL phase in the South Korean LED industry refers to Samsung, Seoul Semiconductor and LG Display’s adoption of patterned sapphire substrates (PSS) to increase LED brightness to achieve new technology breakthroughs. As LEDs started to penetrate the large display LED backlight market, LED demands soared. Samsung and LG acquired a large volume of MOCVDs from U.S. and Germany, accelerating LED supply chain developments. Seoul Semiconductor also started to actively expand its patents and technologies throughout the LED supply chain, and expand globally which impacted even top Japanese LED manufacturer Nichia.
Due to large export demands, the three Korean manufacturers soon were ranked among global top 10 LED manufacturers. Especially, Seoul Semiconductor started off as a LED package manufacturer, but has picked up elite engineers from Japan at early stages of its development. The company collaborated with renowned University of Tokoshima and Northeastern University, and acquired many original LED patents from these two universities. For instance Seoul Semiconductor acquired AC LED and high power LEDs patents Professor Shiro Sakai’s lab in University of Tokushima. Sakai was Nobel laureate Shuji Nakamura’s teacher. These LED patent portfolios laid down a firm foundation for Seoul Semiconductor, giving it a leading position in Korea to this day despite limited export market expansions.
The SSL phase peaked in 2012, when nearly all display backlight adopted LEDs, and just as lighting started to shine in the industry. Samsung and LG joined the industry as two lighting brands, expanding their LED market presence. However, this positive development was short lived, backlight demands soon declined sharply. LED lighting product prices were also impacted by Chinese manufacturers, while Samsung and LG started to make breakthroughs in OLED technology. Samsung soon took a conservative approach in the LED lighting market, and gradually withdrew from it. Seoul Semiconductor remains the sole Korean LED manufacturer that is still in the industry.
Korean LED manufacturers full scale retreat phase
The third phase is marked by Korean manufacturers large scale withdraw from the LED industry, which was markedly visible after 2013. By the year 2013, LED backlight in large displays reached 100% market penetration indicating a natural decline in demand, moreover companies were pressured by the rise of Chinese LED industry, which pressured Korean companies to look for the next generation display technology. This resulted in a large scale exit from the LED industry headed by Samsung and later followed by LG. Seoul Semiconductor has remained the only Korean LED chip manufacturer to scale up investments in CSP LED technology, while LG and Samsung’s LED business arms are now focused on developing next generation technology for group affiliated businesses, and have become less active.
To develop LED chips with higher C/P ratio, small to mid-sized Korean LED manufacturers have halted LED production and acquiring large volume of LEDs from Chinese companies instead to secure their market shares. Even the top three SSL LED manufacturers in the industry are outsourcing their production to lower costs, and are no longer in-house producing LEDs. Based on long term industry observations, the large Korean LED manufacturers will probably take the same route as European and American companies in the industry, where they sell their LED businesses to Chinese buyers.
Korea’s technology industry future
In Korea, LEDs are barely getting any attention. Instead, OLEDs and quantum dots have come under Korea’s industry spotlight. Korea’s advantages is its large electronic export market, and a comprehensive electronic product supply chain. However, few of its products are innovative or original.
In addition, Koreans will do whatever it takes to acquire innovative patented technology if they find it worthwhile. Koreans will even upgrade the technology, such as semiconductor used in LCD has evolved into OLED and QD. As long as Koreans remain diligent the country’s tech industry will still have a bright outlook.
Korea is a country that strives to acquire everything from IC, LEDs and LCDs. They not only want to solidify their supply chain, they also invest in equipment. Yet, this approach of dabbing in almost every technology industry has created many rivals that are highly cautious of them. If Japanese technicians had not secretly supported the Korean tech industry, it would have been very difficult for Koreans to acquire low-priced technologies. Samsung has a frenemy relationship with many U.S. and European manufacturers, on one hand Korean companies are the latter’s supplier, but on another level they are still rivals. It is difficult to maintain this kind of complicated relationship, Samsung and LG have a large export market to help them maintain their industry supply chain. Without the supply chain, these companies will only be able to replace Samsung and LG key materials or components in China, Taiwan or Japan. Other Asian companies might not be able to squeeze out Korean manufacturers, but Samsung and LG’s supply chain is under a lot of pressure.
Moreover, Korea lacks natural resources making it difficult to support a supply chain model that aims to incorporate everything. Hence, manufacturers could end up accidentally making deadly products. Since most Korean manufacturers are large enterprises, and if the group subsidiaries follow Asian culture’s hierarchical order, mismanagement within the group can be a huge issue.
Koreans often ask themselves, do we want a global Samsung or a Korean Samsung? It will take a long time before there is a solution to this dilemma as witnessed in Samsung’s recent Samsung Note 7 battery explosion incidents, would it provide an answer to the pending question? Or will it be the turning point for Korean technology industry where it moves from pinnacle to demise?
It might be Korea’s technology fate that Samsung is key to its success, but also the potential cause of its decline.