Domestic sapphire materials companies, which were put up for sale last year, have difficulty finding new owners. As the much-anticipated LED industry, the biggest market, is still struggling, and it has become difficult to develop new markets such as the smartphone cover glass, the downstream industry is far less attractive now.
According to industry insiders on January 25, the sapphire materials companies, which were put up for sale last year, have not been sold for one whole year. As they cannot find new owners, they are having difficulties acquiring new customers and establishing business strategies.
LG Siltron has been looking for a buyer for its sapphire ingot and wafer business division since early last year, but has not found any. As LG Innotek, a group affiliate, is strategically pushing forward with the LED chip manufacturing business, this company thought it would have enough demands, and made huge investments in the sapphire wafer business. However, Since LG Innotek’s LED business is still struggling in the red, and LG Siltron focused its investments in the sapphire wafers for 6-inch LEDs instead of the 2–4-inch LEDs which have a lot of demands in the market, however, market prediction was way off the mark.
“LG Siltron made huge investments in excess of KRW100 billion, but its sales were only worth a few billion Korean Won,” said an industry insider. “As the market conditions are not showing any sign of improvement, there is no buyer either.”
POS-HiAL, producing the high-purity alumina, the raw material for the sapphire ingot, also invested KRW150 billion back in 2013, and completed the construction of a production plant with an annual capacity of 2000 tons. The plant began production in earnest last year, but it could not last one year. As Kwon Oh-joon, new CEO of POSCO began to sell its non-core businesses except for steel, POS-HiAL is naturally going through the liquidation process. The factory has already stopped operation.
“Most employees are taking time off from work, and the company has only the minimum manpower necessary for taking care of last year’s inventory,” said a POS-HiAL insider. “Shutting down the plant only after its establishment because of poor performance means that POSCO did not fully understand the materials industry, and it implies that POSCO did not have the will to foster this industry.”
Some companies were not put up for sale, but temporarily stopped operations or reduced production quantities a great deal. OCI is producing sapphire ingots according to the heat exchange method (HEM), which requires expensive equipment, it is difficult to secure revenues, and so they temporarily stopped production. As deficits continued, Sapphire Technology is known to have cut the production volume in half.
“As the LED industry, the biggest market, is stagnant, the entire downstream industry is seriously hit,” said industry insiders. “Chinese companies are said to show interest in the Korean companies up for sale, but since there is no reason why they must insist on local production, it seems quite unlikely that these companies will ever change hands.”