Executive Interviews

Asian Metal: Mr. Yang, thanks for taking the interview by Asian Metal. Please introduce your business briefly and your business experience.

Mr. Yang: HC Semitek Corporation, established in 2005 and listed in 2012, is a leading enterprise of semiconductor technology in China. At present, with three major production bases in Zhangjiagang, Yiwu, and Yuxi, and a research and development base in Zhuhai under construction, our products cover LED epitaxy, chip, sapphire substrate, and compound semiconductor. Our LED chip products cover all LED market segments and we also provide chip-level solutions. Our products are widely used in TVs, computers, mobile phones and other consumer electronics, such as indoor and outdoor displays, car lights and various lighting, ultraviolet, and other high-end markets. In the past ten years, HC's product application fields kept continuously expanded, including Mini LED ultra-high-definition displays, Micro LED wearable devices and large-screen displays, multi-functional displays for conferences and theaters, government traffic command centers, medium and large-sized consumer electronics high-end backlights, intelligent Lighting, car lights and plant lighting, ultraviolet disinfection, and sterilization, etc. HC Optoelectronics officially entered the field of GaN-based power electronic devices in 2020 mainly for fast chargers for mobile consumer electronics terminals, other power supply equipment, cloud computing big data server centers, communications, and automotive applications, etc., leading the third generation of semiconductors cutting-edge technology in the field. I graduated from Harbin Institute of Technology with a master's degree in physical electronics. Before working as Group Purchasing Director of HC, I served as the Senior Sales Manager of Viavi Corporation, the Regional Sales General Manager of Finisar Corporation, and the Sales Director of Nokia, with more than 11 years of rich management experience in internationally renowned companies in the communications industry. Now, I am responsible for the procurement of equipment, engineering services, raw materials, and other materials for the three bases of HC Optoelectronics Group.

Asian Metal: Please briefly introduce the application fields and characteristics of gallium metal used in the LED industry and the proportion as a raw material to the cost.

Mr. Yang: In the LED industry, gallium metal is mainly used in two fields: one is for the second-generation semiconductor gallium arsenide substrate, which is the basic material of LED red and yellow epitaxy plants. At the same time, gallium arsenide substrate is also the substrate material for compound semiconductors such as VCSEL laser epitaxy; the other is the raw material of MO source for organic vapor deposition of the epitaxial functional layer, including trimethylgallium, triethylgallium, and so on. The proportion of gallium arsenide substrate and MO source, which is made of galium metal, accounts for about 10% of the cost of chip raw materials.

Asian Metal: How much gallium metal will HC consume in 2022 and what is the LED industry's annual consumption of gallium metal in the past years?

Mr. Yang: Over the past year, HC directly purchased and used MO sources and GaAs substrates, and the volume of gallium metal converted was about 30t a year. I estimate that the annual consumption of gallium metal in the LED industry in China is about 180t in the past years.

Asian Metal: How many tons of gallium metal do you predict the Chinese LED industry would consume in 2022 and do you think the demand would continue going up in the coming three years?

Mr. Yang: Judging from the newly installed production capacities in the LED industry, the consumption of gallium metal in 2022 would reach around 210-250t. With the gradual growth increase in new markets including Mini LED, small-pitch direct display, high-end lighting field, and even Micro-LED led by smart wear in the future, LED producers have been expanding their scales of production successively. We expect that the demand for gallium metal in the LED industry would continue increasing and tend to move up by 15% YoY depending on relevant forecasts of the LED industry.

Asian Metal: As a terminal consumer raw material spanning two levels of the LED industry, why do you focus on the gallium metal industry especially in the past year given that you did not directly purchase the materials? What is the impact on your company's procurement process?

Mr. Yang: In the recent years, the prevailing prices of Chinese gallium metal 99.99%min fluctuated greatly, especially since the end of 2020, the mainstream prices increased directly from RMB1,000/kg (USD151/kg) to around RMB2,000/kg (302/kg) by around 82% and remained over RMB2,000/kg (USD302/kg) since then. Such fluctuated prices keep very unfavorable for downstream industry consumers to control costs stably. At the same time, the rapid rising costs also dragged the cultivation of new incremental markets and application fields. In terms of supply, we believe that the lack of a stable supply mechanism for gallium metal caused us a lot of supply instability. Based on the consideration of raw material supply and cost, we have to focus on gallium meta price trend in the past two years. However, although gallium metal prices keep increasing, our LED products’ prices are hard to increase accordingly as the rising cost pressure from raw materials could not be smoothly transmitted to the terminal.

Asian Metal: Facing the tight supply of gallium metal and the continuous rising prices, how does HC adjust the procurement process? Do you think the galium metal will be replaced by new materials?

Mr. Yang: As I stated above, the increasing prices of gallium metal directly led to the rising prices of chips, which play an important part in our cost distribution. As the response, HC, considering the possible price volatility risks, adjusted the inventory level. We work with regular suppliers on MO source and gallium arsenide chip shipping, technical improvements, bottling methods and other aspects to try to keep the overall cost at a low level. In addition, we would continue maintaining an in-depth understanding of the whole dispersed metal industry chain and paying more attention to the price fluctuation of gallium metal.We had to adjust its relatively stable procurement strategy to face the rising cost of gallium metal and tight supply together with our suppliers. In the short term, gallium metal is the most important raw material for gallium arsenide substrate and MO source, so it is difficult to be replaced by other materials due to the important role of gallium compounds. In the long term, the imbalance between supply and demand would stay always a problem faced by consumers. With the continuous development of the third-generation semiconductor technology, there would probably new materials for replacement, but it depends on the evolution of science and technology.

Asian Metal: What do you think of the development prospects of the LED industry in the coming three years?

Mr. Yang: We hold optimistic attitude to the LED industry’s development in the coming three years. Mini-LED, which opens up display innovation, has been widely used in indoor screens in the field of LED direct display. Mini-LED backlight products are also introduced by most terminal manufacturers including Apple and Samsung, and the consumption began to gradually increase. At the same time, in emerging fields such as high-end lighting, plant lighting, and invisible light, the demand for LED also keeps increasing, and these markets would drive the rapid growth of the industry. In the meantime, the increase in the application demand of compound semiconductors such as VCSEL lasers also promotes the demand growth of gallium metal.

Asian Metal: Thanks for accepting the interview with Asian Metal. We wish HC to make still further progress!

Mr. Yang: I am very grateful to Asian Metal for this interview and also look forward to the 14th In&Bi&Ge&Ga Forum to be held soon.