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GaAs Epitaxial Substrate Market Sputters in 2012

by Eric Higham | 8月 29, 2013

Well, it’s that time of year, at least in the Northeast of the US. We start to get a taste of cooler, crisper weather as we reflect on all the adventures and trips of the summer. Children see a return to school in their future and teachers pull out planners and start preparing for the fall. In the GaAs and Compound Semiconductor Technologies Service at Strategy Analytics, the end of August means one thing: my synopsis and forecast of the semi-insulating GaAs epitaxial substrate market (Markets for Semi-Insulating GaAs Epitaxial Substrates: 2012 - 2017), along with the accompanying data model (GaAs Epitaxial Substrates 2012-2017) has been published!

These are proving to be challenging times for GaAs epi manufacturers. We estimate total demand for semi-insulating GaAs epitaxial wafers fell by nearly 5% in 2012. There appear to be several factors at work: the overall GaAs component industry was relatively flat in 2012, growing by about 2%, the transition of handset switches from GaAs appears largely complete, handset power amplifier manufacturers are developing multi-band PAs that will replace multiple single-band PAs, slowing growth of GaAs-intensive smartphones and competing technologies all contributed to the decline.

On the revenue side, the outlook is no brighter. In the classic “good news/bad news” scenario, our survey results showed evidence that Japan and the broader region are recovering from the devastating earthquake and tsunami of 2011 (the good news), but this has resulted in a more rapid decline in wafer pricing as the market tries to get back to more historical wafer prices and price erosion profiles.  This combination of reduced demand and more rapidly falling wafer pricing dropped revenues by 8%, down to slightly more than $550 million in 2012 (the bad news).

Looking into the future, we expect strong growth in the handset market in 2013 will pull the GaAs device market above historical growth rates, but this boost will be short-lived as the overall GaAs market flattens. I am forecasting that the semi-insulating GaAs epitaxial wafer market will see a CAAGR of slightly less than 2% over the next 5-years. With epi wafer prices falling, this material demand will not be large enough to offset the price erosion and the overall market revenue will contract, reaching an estimated $458 million in 2017.

On the supplier side, the most interesting news was how active IQE was with acquisitions. In June 2012, they announced they had acquired RFMD’s MBE manufacturing capabilities and in January 2013, they announced the acquisition of Kopin’s III-V business. With the RFMD acquisition, they gain a larger foothold into one of the largest GaAs device manufacturers and solidify their dominance of the MBE market. Based on 2012 results, IQE will account for more than 90% of MBE wafer production entering 2013. With the Kopin acquisition, they increase their position at Skyworks, the largest GaAs device manufacturer and move themselves past VPEC as the largest manufacturer of MOCVD wafers. With these two acquisitions, we estimate IQE entered 2013 accounting for more than 50% of the entire epitaxial substrate production. With acquisitions, the devil is always in the integration details, but it will be very interesting to see how IQE utilizes their newfound scale.


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