Veeco patent lawsuit could stymie Chinese MOCVD vendors
Veeco (VECO) has filed a patent infringement lawsuit against SGL Carbon (SGL.GR) that is focused on the graphite wafer carriers used in MOCVD tools. Veeco alleges that its patents cover the use of certain wafer carrier designs that are being infringed by SGL and has asked that SGL immediately stop selling those products that infringe and compensate Veeco for loss suffered. Given that there are only three suppliers of such graphite components, SGL, Toyo Sanso (4091.JP), and Xycarb (pvt), limiting a primary supplier or all three suppliers will have a significant effect on the MOCVD space. According to sources, all three suppliers have halted sales of those products that might be affected by the 4 Veeco patents that are the basis for the suit.
The design of the wafer carrier is the issue here, and while other designs that do not infringe on Veeco’s patents are available, a number of Chinese MOCVD vendors, who continue to challenge the incumbent’s Veeco and Aixtron (AIXA.GR), use a similar design. Should the negotiations between SGL and Veeco not produce an agreement for the use of the patents, SGL might have to halt shipments to those Chinese MOCVD tool vendors that use such a design. Chinese MOCVD tool vendors still have a limited market share of 11%[1], but Chinese tools are being tested and validated by local LED suppliers with the state directive of making China self-sufficient in the LED space an overriding factor. If their supply of wafer carriers is halted during an extended negotiation period or trial, it could limit their ability to deliver previously scheduled MOCVD tools and erode their market share.
Whether Veeco is interested in licensing their IP or just blocking their Chinese rivals is not known, but the impact of the litigation is certainly in Veeco’s favor. In fact, Aixtron’s and Sanso’s tools use different wafer carrier configurations, which would allow for a Chinese LED supplier to shift away from a potential Chinese vendor if timelines are disrupted, so the benefits of the suit also accrue to the other key MOCVD vendors eventually, but certainly not to Chinese tool suppliers. Business makes strange bedfellows…
[1] 2016 - Trendforce
The design of the wafer carrier is the issue here, and while other designs that do not infringe on Veeco’s patents are available, a number of Chinese MOCVD vendors, who continue to challenge the incumbent’s Veeco and Aixtron (AIXA.GR), use a similar design. Should the negotiations between SGL and Veeco not produce an agreement for the use of the patents, SGL might have to halt shipments to those Chinese MOCVD tool vendors that use such a design. Chinese MOCVD tool vendors still have a limited market share of 11%[1], but Chinese tools are being tested and validated by local LED suppliers with the state directive of making China self-sufficient in the LED space an overriding factor. If their supply of wafer carriers is halted during an extended negotiation period or trial, it could limit their ability to deliver previously scheduled MOCVD tools and erode their market share.
Whether Veeco is interested in licensing their IP or just blocking their Chinese rivals is not known, but the impact of the litigation is certainly in Veeco’s favor. In fact, Aixtron’s and Sanso’s tools use different wafer carrier configurations, which would allow for a Chinese LED supplier to shift away from a potential Chinese vendor if timelines are disrupted, so the benefits of the suit also accrue to the other key MOCVD vendors eventually, but certainly not to Chinese tool suppliers. Business makes strange bedfellows…
[1] 2016 - Trendforce
Figure 6 - MOCVD Wafer Carrier - Source: Xycarb
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