LCDs Pushing Demand for NF3

11 October 2004 00:01  [Source: ICB Americas]

The nitrogen trifluoride (NF3) market continues to grow, spurred by demand for liquid crystal displays (LCDs), although the threat of oversupply lies in the distance. LCD fabs currently represent only about 20 percent of the NF3 market, according to Deutsche Bank, but LCD demand is growing at an estimated 30 percent per year, as opposed to 10 percent growth for other semiconductor applications.

Deutsche Bank sees LCD fabs contributing more than 40 percent of the global growth in demand for NF3, which is used to remove film deposits left on the glass on which LCD panels are cut. In semiconductors, NF3 is used to decontaminate the chemical vapor deposition chamber.

Allentown, Pa.-based Air Products and Chemicals Inc. is the global leader in NF3 production with about 50 percent of the market. While the majority of the company’s customers are based in Asia, all of its NF3 is produced at its facility in Hometown, Pa. This spring, Air Products began a 50 percent capacity increase for NF3 that should be completed by spring 2005. According to Deutsche Bank, Air Products is increasing capacity from 2 million to 3 million pounds per year. Air Products has boosted its production capacity at least six times since 1995, often in the 35 to 50 percent range.

Air Products states that all of its NF3 growth is “a direct result of customer demand,” adding that it will continue to grow its Hometown facility to accommodate for that demand. Air Products continued making NF3 expansions during the recent downturn in the semiconductor market.

Great Neck, N.Y.-based Pittsburg Research Inc. estimates that Air Products’ NF3 sales are growing at about 40 percent a year. Sales of electronics-related gases represented 13 percent of the company’s $6.3 billion sales in 2003 (about $819 million). About 15 percent of Air Products’ NF3 goes into LCDs, but observers project that figure to reach 25 percent by 2009. Some of Air Products’ LCD-producing customers include Sharp and Samsung, as well as LG Philips, Chi Mei Optoelectronics and AU Optronics. In September, Air Products was awarded a contract to supply NF3 and several other gases to long-time customer Samsung Electronics’ new LCD factory in Tangjung, Korea.

According to Deutsche Bank, global NF3 capacity should increase by 65 percent to 54,000 tons per year by 2006. It estimates that Air Products’ NF3 sold to the LCD market goes for $46 per pound, while NF3 for the semiconductor market sells for around $73 per pound.

Between 15 and 20 percent of NF3 produced is used for cleaning applications in the LCD market. This market usually uses 99 or 99.9 percent purity. About 65 to 70 percent of NF3 produced is used in semiconductors, where 99.99 or 99.999 percent purity is the standard.

NF3 for semiconductors is more expensive than NF3 for LCDs, not only because of its greater purity, but also because it is shipped in standard 55 pound cylinders, as opposed to NF3 for LCDs, which is shipped in 8,000 to 16,000 pound bulk containers. Due to the larger size of the decontamination chamber, “current flat panel fabs like Samsung’s [newest facility] will use approximately four times the amount of NF3 than other flat panel and traditional semiconductor fabs use,” says an Air Products representative.

However, Deutsche Bank says that if the next generations of LCD fabs being made slows down, “we could see another round of severe price erosion as producers try and place new capacity.”

Demand for LCD panels in TVs and monitors is expected to grow from $24 billion in 2003 to more than $35 billion this year, says The Information Network, a New Tripoli, Pa.-based market research firm.

One source says prices are being driven down by new sources of supply that come as more producers (especially in Asia Pacific) are either increasing capacity or jumping on the NF3 bandwagon. Meanwhile, some producers are hoping that an increase in LCD demand will absorb the excess capacity that is keeping prices down. “We expect NF3 pricing to decline a further 10 percent in 2005, with pricing for long-term supply contracts at LCD fabs expected to come under particularly severe pressure,” says Deutsche Bank analyst David Begleiter.

There are warnings that LCD oversupply is on the horizon, however. In August, Austin, Tex.-based consulting group DisplaySearch reported that in June, thin-film-transistor LCD prices dropped for the first time in 18 months. The consultancy projects further declines in prices as well. DisplaySearch sites oversupply as to the fall in share prices for a variety of Asian LCD companies.

Whether a slowdown in LCD purchases will have a great impact on NF3 manufacturers is yet to be seen.

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