LG Shifts Gears
LG Electronics (066570.KS) has indicated that it is making changes in its industrial equipment focus in order to enter the lucrative advanced semiconductor packaging equipment business. This is a change from its previous strategy that focused on improving the productivity of its many affiliates through the development of industrial equipment. The focus will move from internal to external customers for the new tools. In particular LG is thought to be concentrating on the production of LDI (Laser Direct Imaging) and glass substrate drilling tools. The market demand for LDI tools id primarily from High-Density interconnects (47% - 55%) where line widths are critical and spacing is a major factor.
LDI competes with photolithography in the HDI market but as feature size continues to decrease the capabilities for LDI line widths down to a few microns far exceed the capabilities of lithography. Of course there is a catch, and that is cost. The up-front cost of an LDI tool can run from $500k to $1.5m, while mask fabrication is typically outsourced and runs between $500 and $5000/mask, along with a number of lower technology tools and chemicals. That said, the comparison is not that simple. Photolith is ideal (and cheaper) for relatively simple, high-volume PCB and interconnect designs, while LDI shine in smaller run, complex programs and has none of the registration and wear-and-tear problems that mask systems have. But the real problem for LG is not the technology, it’s the fact that the top 5 LDI producers control more than 70% of the market, making it difficult for newcomers, even large ones, to get established.
LG expects to have LDI and glass drilling product this year and is already actively looking for external clients, but we expect it will be challenging to compete with Orbotech (KLAC), Dainippon (7912.JP), and Han’s Laser (002008.CH) unless LGE has something unique. The good news is it is an expanding market, with LDI expected to be the tool of choice for over 40% of global PCB manufacturing in 7 years, but the downside is the biggest market is China and maintaining good relations with China and the US seems to be challenging in its own right currently.. It is good that LG seems to be taking a more ‘profit-oriented’ approach to its industrial equipment business, but we expect it will not be an easy transition.
LDI competes with photolithography in the HDI market but as feature size continues to decrease the capabilities for LDI line widths down to a few microns far exceed the capabilities of lithography. Of course there is a catch, and that is cost. The up-front cost of an LDI tool can run from $500k to $1.5m, while mask fabrication is typically outsourced and runs between $500 and $5000/mask, along with a number of lower technology tools and chemicals. That said, the comparison is not that simple. Photolith is ideal (and cheaper) for relatively simple, high-volume PCB and interconnect designs, while LDI shine in smaller run, complex programs and has none of the registration and wear-and-tear problems that mask systems have. But the real problem for LG is not the technology, it’s the fact that the top 5 LDI producers control more than 70% of the market, making it difficult for newcomers, even large ones, to get established.
LG expects to have LDI and glass drilling product this year and is already actively looking for external clients, but we expect it will be challenging to compete with Orbotech (KLAC), Dainippon (7912.JP), and Han’s Laser (002008.CH) unless LGE has something unique. The good news is it is an expanding market, with LDI expected to be the tool of choice for over 40% of global PCB manufacturing in 7 years, but the downside is the biggest market is China and maintaining good relations with China and the US seems to be challenging in its own right currently.. It is good that LG seems to be taking a more ‘profit-oriented’ approach to its industrial equipment business, but we expect it will not be an easy transition.
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