China LED sapphire drop in demand

China LED sapphire demand down, pricing flat in the month of August,2012. Our checks find that the total demand for external LED sapphire in China in the month of August was about 1.2M 2-inch equivalents (TIEs), down -29% m/m, andis tracking to about 4M TIEs for 3Q12. Our checks also find that LED sapphire pricing in the month of August remained flat m/m at $10 per 2-inch wafer.

LED sapphire demand from tier-1 China customers tracking up 11%q/q .Our checks find that sapphire demand from tier-1 LED chip companies in Chinadeclined to 750K TIEs in Aug-12 compared to 900K in July on lower purchases bySanan as we found that it is ramping its internal sapphire manufacturing capacity.
LED sapphire demand from tier-2 customers is tracking up 12% q/q (+25% m/m)while demand from China based slicing companies’ is tracking up 74% q/q.
China’s overall LED utilization rates near 60%; too low for Veeco/AixtronWe estimate that utilization rates at tier-1 LED chip makers in China are actuallyhigher, tracking to 70% in 3Q12 versus 55% in 2Q12. But, overall LED utilizationrates in China likely need to be 80% by the end of 2012 to see meaningful MOCVD orders for Veeco or Aixtron in 1H13 (our utilization rate calculationassumes China has 914 MOCVDs, each needing an average of 3,000 TIEs/month).
Rubicon’s sales to China still small; GT’s China customers ramping slowly. Our checks found that Rubicon’s direct sales of 2-inch


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