GaN Optical Market Study

1. GaN Optical Market Study Mark Schnittker SJSU MBA Program March 2008

2. Mission Statement To outline the Gallium Nitride industry and identify potential market opportunities for Group4Labs

3. Market segments for GaN wafers • High Power RF amplifiers for cellular base stations • WiMAX industry and implications on the base station power amplifier market • Radar for military and civilian use • LED industry for blue and white lighting • Lasers used in blu-ray and Sony playstation 3

4. Outline for each segment • Background • History • Define segments • Technical specifications • Market • Current Market size • Projected / future market size • Players • Market forces and trends • Major players driving the change • Forces driving change • Conclusion

5. Professional interviews • Rafik Ward, Finisar Corp. • Senior Director of marketing • Rob Stone, Intel Corp. • Product marketing manger • Danny Yu, Philips Lumileds Company • Vice President Business Management & Strategic Marketing • Mike Krames, Philips Lumileds Company • Director Advanced Laboratories • Charles T Hansen, Raytheon Corp • Principle Investigator, Radar Design • Michael Jock, BAE Systems • Sr. Scientist defense systems

6. LED Market

7. LED Background (segments) • Mobile • Mostly GaN keypad and display illumination for mobile phones and PM3 players. –Cost and efficiency. • Signage • GaAs and GaN direct view displays and GaN backlit displays. –Color accuracy and stability over time. • Signals • Traffic signals using GaAs HBLEDs-Color and reliability. • Automotive • GaAs colored markers, Interior gauge lighting, and GaN driving and head lights. –High power and reliability. • General Illumination • Flashlights, residential and commercial lighting, portable illumination. -High output power, high efficiency, low cost/lumen. • Other • Indicators, niche illumination, medical applications

8. LED market • Only GaN based segments left for analysis • Mobile market no longer drives growth • Automotive is the growth driver, GaN and GaAs. • GaN based headlights are high margin applications which only the top makers work on.

9. Major contributors to the market • The GaN LED market has become an oligopoly of a few major contributors leading the pack in development and high end applications. • There are a large number of Asian foundries competing for the lower end applications. Most of them developed for the mobile market segment.

10. Marked driving forces and trends • Commoditization and price wars have completely eroded the mobile segment.

11. Intellectual property • Intellectual property rights have been a major contention in the white light LED industry, primarily in the phosphor techniques owned by Nichia. • Many LED makers have either sought to gain enough IP of their own to cross license with Nichia, or have used alternative phosphors like those from Intematix. • There are still many patent disputes and international injunctions held, but thanks to a growing number of cross licensing, the market is business has become more civil, and techniques better defined.

12. Intellectual property agreements License Cross license Source: Yole, LED magazine

13. Illumination trends • Work done by leading LED manufacturers and developers have generated white LEDs which can now compete with fluorescent lighting >60lm/W. • High power white LEDs can be used as head lights, but are 3X more expensive than halogen systems and require more cooling. • High ASP, switching costs and inconsistent specifications between vendors are holding back white LEDs in both the automotive and general illumination markets.

14. Conclusion • Automotive illumination will lead the way for GaN. • Auto designers are highly motivated to differentiate their product with unique styling and the “green” image that LEDs provide. • Fast response of LEDs as compared to incandescent bulbs are a safety selling point adding to LED integrating momentum. • More collaboration with LED leaders • will work together to make consistent specs and installation techniques and IP agreements to make LEDs more attractive. • New entrants in applications specialists and long life span LED drivers • The largest customer acceptance barriers are transitioning from technical LED specs to lack of integration knowledge.

15. Conclusion (Cont) • No major new LED foundry entrants. • With continued margin erosion, high competition and high barriers to entry, it is more likely to see existing companies ramp up with increased volumes instead of new contenders emerge. • New epi wafers • In attempts to increase yield/epi reactor time, we can expect to see an increase in wafer size, and changes to more expensive epi wafers if they can achieve higher yields.

16. Laser Market

17. Laser BackgroundTwo major segments • Data storage segment • PS3 games • Blu-ray players • Computer play/record • Displays segment • Rear projection televisions • Conference room projectors • Personal pocket projectors

18. Data storage specification • 405nm lasers are standard between Blu-ray and HD-DVD

19. Displays specifications • Blue to come from GaN. Green could be from GaN in future • Output power and price depend on application.

20. Market: Sony GaN laser shipments (internal)

21. Market: Total projected revenue of GaN lasers Revenues being driven mostly off of Data storage segments

22. Market: Pocket display TAM • Small laser light engines can enter the personal displays segment through pocket projectors

23. Forces and trends: Data storage • Large screen TVs are growing in popularity and need more data rich content to fill them • Blu-ray and HD-DVD formats invented using 405nm Blue laser • Public wants one standard to invest in • Toshiba announces it will stop production of the HD-DVD format, effectively allowing Blu-ray to be our single 405nm format,

24. Forces and trends: laser rear projection TVs • Larger flat panel screens are gaining popularity • Coherent, Novalux, and Collinear all work to develop laser light engines to compete against LCDs and Plasmas. • GaN High power lasers are still not available. • All three companies attempted alternative laser technologies, and all three failed.

25. Forces and trends: Micro/Pocket projectors • Micro displays increasing market shipments • Major development on micro light engines • Current technology feasible for low power light engines • Successful systems near production release. • Cell phone manufacturers very interested • Laptop manufacturers also interested

26. Forces and trends: Technical advancements • Almost all technical work being done on laser advancement is related to Epi. • Nichia, UCSB, Rohm, NCSU working on non polarized or semi polarized GaN • Sharp working on MBE • NEC working on wet etch

27. Forces and trends: Fighting the “Green Gap” • High power green lasers not available, and thus impair laser displays • DARPA funds VIRGIL with is a conglomerate of nine groups

28. Conclusion: Data storage • 405nm Data storage segment is by far the largest, and the most guaranteed market segment • An oligopoly of Sony, Sharp, Sanyo, and Nichia have all ready ramped up production capabilities and locked out the market for new entrants. • Business is all between Japanese firms that make many of their accomplishments as partners

29. Conclusion: Rear projection televisions • Early attempts failed, and not it is probably too late. • LCD will become the primary market for televisions. • High power blue GaN will be available, but high power green GaN lasers is tough, and probably will not happen soon

30. Conclusion: Projectors and green gap • VIGIL’s success will be critical for the future of projectors • Even modest green GaN lasers can be utilized for small projectors • Laser projectors likely to take hold regardless of green GaN, but price will be about $100 higher/unit.

31. Questions?