Why Bulk GaN cannot become the New Silicon

Published By: IndustryARC Published On : 10-Sep-2015

Bulk GaN substrate the most promising and much talked about material from the last few years, especially in power and optoelectronics. It is a wide gap semiconductor, has high electron mobility, can tolerate higher temperatures, the devices can be scaled to smaller sizes, and much more. However, here is the BUT: the substrates are not capable enough to substitute the existing substrates such as Silicon or Sapphire. Although technically, the substrates are way too superior to the existing substrates, lack of market developments/ slower market growth is not encouraging for bulk GaN to progress forward. The slower market growth and lack of market developments, we see, is due to:

Ø  Lack of Venture Capital
There are several capable companies emerging with strong technical expertise. However, as the technologies are complicated, costly and are highly subjected to market risks, the traditional fund sources are disinclined to invest in this market. Moreover, it is difficult to convince the investor on the returns on the investments. Even though the addressable markets for these materials are valued by billion dollars, the journey to achieve the goals is difficult, slow and risky. Hence, the market is still waiting for that one golden hand who can take a chance to become the pantheon of gallium nitride market.
There are players entering into market in some countries, especially in China, to capitalize the 2-inch substrates area. But, these companies have lesser volume and are of low quality, not fully capable to disrupt the market. Due to the lack of investors, some good companies are in the verge of losing out. Ammono S.A., founded by Robert Dwilinski is one of the few companies that pioneered production of gallium nitride substrates. It has unique technology and strong team of technical experts to its advantage that can produce ‘best’ gallium nitride. However, the company is out of funds from few years and is struggling to find its foot in the market. Likewise, if there is company that is strongly pursuing research in this area, would find it difficult to enter the market. The barriers are too high. Only sufficient financial reserves can help companies to stride and survive. For instance, Soraa Inc., the champion of GaN on GaN LED and the sole company to produce devices on bulk GaN, is believed to positively making sales and remarkable innovation since its introduction. The key factor is: it is founded by no less than the Nobel Laureate, Shuji Nakamura, inventor of blue laser. It is relatively easy for the company to raise funds and already has Khosla Ventures as its investors. After all, he has proven track record of creating billion dollar markets.

Ø  Less activity from Stakeholders
The Bulk GaN market has very few players, but there are few well established companies such as Sumitomo Electric Industries Inc., Mitsubishi Chemical Corporation, and so on. These companies account for larger share in the market, but there is little progress in terms of innovation. Moreover, in 2015, the Hitachi Metals, Ltd has moved out of the market place and sold its compound semiconductor division to Sumitomo Electric Industries Inc. This acquisition adds great value to Sumitomo, but it is important to note that Hitachi Metals, Ltd has decided to sell one of its strong divisions after assessing the future growth potential of the business. The company must have reached to this decision owing to the slow growth and fewer profits in compound semiconductor market and sidelined this business portfolio to spend its corporate resources effectively. Given that 90% of the bulk GaN production comes from Japan, this acquisition assumes importance. The market players are not too optimistic to invest and bring traction in the market.  Hence, at this time, it is very well for the stakeholders to involve in partnerships, collaborations and acquisitions.
For instance, the substrate makers and the equipment suppliers can make a good combination to optimize the production process. Likewise, the device manufacturers can partner/acquire substrate manufacturers. Meaningful collaborations can generate the necessary traction in the market in the coming years.

Ø  Presence of Effective Substitutes
The bulk GaN substrate suffers threats from potential substitute such as Silicon Carbide. This is also a wide gap semiconductor material which possesses key advantages and is actively progressing forward. The market for SiC substrate is positive and good amount of innovation is expected from manufacturers in the future.
Hence, the GaN market is not estimated to be aggressive at-least in the next five years and has tough road ahead to become as ubiquitous as silicon. According to IndustryARC study, bulk GaN market revenue is estimated to constitute only 4% in the overall GaN substrates market and is forecast to grow at a rate of 11% driven by demand from power electronics.
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