I just published the 2012 update on the semi-insulating GaAs bulk substrate market. The report can be found here: Semi-Insulating GaAs Substrate Markets: 2012-2017, with the accompanying data model found here: Markets for SI GaAs Substrates 2012-2017. This market can be characterized as the proverbial “good news/bad news” situation. If you are an optimistic, glass is always half-full sort of person (and don’t we all know some of those??), the good news is the supply chain disruptions caused by the horrific earthquake and tsunami in Japan in 2011 appear to have largely worked their way through the system. Many of the largest GaAs substrate manufacturers are in this area and 2011 results confirmed a substantial disruption to the supply chain. So, a return to normalcy is good news, not only for the industry, but also for the people living in the affected areas.
However, this “good news” has resulted in some bad news. In 2011, we saw the substrate usage shift toward 4” wafers and substrate pricing spiked up. At the time, we speculated that the shift to 4” was a result of the disruptions at the large Japanese companies that are responsible for the majority of 6” wafer production. We also believed that as production returned to normal, pricing for all GaAs substrate diameters would drop back to more historical levels. The bad news is that it appears this happened in 2012. Our results indicate that substrate pricing has returned to pre-earthquake levels and 6” substrate production is once again leading the way.
The other “bad news” for the GaAs substrate market was the production fell substantially. The overall GaAs device market was relatively flat in 2012, registering about 2% growth in revenue. The other major trend we are seeing is the evolution of cellular radio architecture to include multi-band PA designs. In this architecture, a single PA replaces multiple single-band power amplifiers. This multi-band device consumes less GaAs area and typically has a lower functional bill of material cost. This new design architecture is an outcome of the growing number of wireless bands that are incorporated into handsets globally. This is most apparent in smartphones and as this segment of the handset market continues to grow, this trend will influence substrate production levels. The net effect of a flat market, architecture evolution and competing technologies was a drop in production of nearly 10% from 2011 levels.
The combination of a large drop in production and substrate pricing returning to pre-earthquake levels meant really bad news for the overall GaAs substrate market. We estimate the revenue in the market was down by 16% from 2011 revenue levels. The future also appears challenging for the bulk GaAs substrate market. We anticipate that the GaAs device market will see above average growth in 2013 and this will temporarily boost GaAs substrate production. As competing technologies continue to gain a foothold and multi-band PAs increase share, we anticipate the overall production will fall from this peak and the overall effect will be slight growth out to 2017. However, with price erosion speeding up as the supply chain gets back to a more normal profile, it appears GaAs bulk substrate suppliers will be hard pressed to increase revenue during the period.
Not the rosiest of outlooks for the GaAs bulk substrate market, but stay tuned for thoughts and updates for this segment.