MARCH 28, 2011 THE WALL STREET JOURNAL
By JUNG-AH LEE
SEOUL—Samsung LED and Japan's Sumitomo Chemical Co. said Monday they will form a joint venture in South Korea to produce sapphire wafers—key materials used to make lighting components in flat-screen televisions and other consumer electronics—to ensure stable supply.
The establishment of the $72 million joint venture comes amid market concerns about a global shortage of wafers following the March 11 earthquake in Japan. According to market research firm IHS iSuppli Corp., Japan's earthquake resulted in the suspension of one-quarter of the global production of silicon wafers used to make semiconductors.
"The suspension of operations at plants could have wide-ranging implications beyond the Japanese electronics industry. A 25% reduction in supply could have a major effect on worldwide semiconductor production," iSuppli said.
A Sumitomo Chemical spokesman said the recent earthquake and tsunami that hit northeastern Japan had no direct impact on the company and said the latest joint-venture plan isn't related to the disasters, which have fueled market concerns about a potential shortage of some key electronics components following a disruption to operations at some local technology companies.
Samsung LED said in a regulatory filing Monday that it will invest $36 million in the 50-50 joint venture with the Japanese company. The venture will produce sapphire ingot and then use the material to make sapphire wafers. The wafers will then be used by Samsung exclusively in light-emitting diode chips. A Sumitomo Chemical spokesman confirmed the arrangement.
"Sapphire ingot is a very important component for making wafers used in LEDs, but its price rose sharply last year, so we did see only a limited supply of the material," said a Samsung LED spokesman who declined to be named.
Samsung LED is a joint venture between Samsung Electronics Co. and its affiliate Samsung Electro-Mechanics Co.
"We are setting up this joint venture with Sumitomo Chemical as the Japanese company is the global No. 1 for a core material in making the ingot and the wafer. We expect this partnership will help us gain further technology competitiveness in the LED market," he said.
Samsung declined to comment about the earthquake and its possible impact on the wafer market.
The joint venture plans to set up a production plant this year and mass produce wafers from early 2012, the Samsung LED spokesman said.
Samsung LED previously had a roster of suppliers for key components, both at home and abroad, the spokesman said, adding that about five companies supply around 90% of the global supply of sapphire ingot.
According to a research firm Displaybank, the global sapphire wafer market is expected to grow to $1.5 billion in 2014 from $554.9 million last year.