**Abstract**
The excessive investment in sapphire substrates in 2011 led to a sharp decline in prices, dropping from $2 to $7. However, as LED lighting and backlight demand surged in the second half of 2012, sapphire shipments began to rise rapidly. Despite this growth, the market faced a paradox where increased production did not translate into higher profits. For example, Taiwanese manufacturers like Dajing Jingmei, Xinjing Diamond, and Jiajing Technology saw their shipments increase by 49%, 32%, and 61% respectively in 2012, but their revenues fell by 25%, 35%, and 21% year-on-year.
This year, the LED lighting and backlight markets continued their strong momentum, further boosting sapphire shipments. The price of sapphire crystal rods also saw a slight increase. However, according to industry reports, this growth has been modest—less than 10%—with minimal impact on substrate pricing. As a result, profit margins remain stagnant, and the industry is still struggling to break through.
To overcome the revenue challenges associated with sapphire substrates, many companies have started investing in non-sapphire applications. However, these new ventures have not yet provided the relief they hoped for. The difficulties in processing sapphire, the high cost of finished products, and the challenges of transitioning enterprises have all limited the potential for stable profitability in this sector.
**Application Diversity**
Tiantong shares entered the sapphire market for LED lighting in 2010. Guo Yuebo, director of the marketing department, explained that the company now also produces parts such as mobile phone camera rear covers, silicon carbide integrated circuit boards, and military-grade sapphire applications.
Currently, sapphire is used in the back cover of smartphone cameras, and Apple has adopted it in the iPhone 5. Due to its excellent wear resistance and light transmission properties, sapphire is widely used in optical testing equipment, making this market one of the largest. Wu Jingjun, deputy general manager of Wuxi Dingjing Optoelectronics, noted that his company is involved in the production of camera covers for a few high-end smartphones.
Although sapphire is currently used in watch lenses, this is not a new market. In the past decade, flame methods were used to produce sapphire mirrors, but they could not meet the high standards required for luxury watches due to poor quality and high costs. Today, the long-crystal growth method is more common, but it results in smaller, tapered crystals that are not ideal for square sapphire. Instead, the heat exchange method allows for larger cylindrical crystals, giving companies that use this technique an advantage in producing sapphire windows.
Song Lei, sales manager at Guizhou Haotian Optoelectronics, said that about 60% of the company’s revenue comes from sapphire substrates, while the rest comes from watch lenses, window films, and mobile phone camera back covers. The heat exchange method helps maximize the utilization of the ingot.
**Cost Constraints on the Market**
Sapphire manufacturers are looking to diversify their applications, but success still depends heavily on market demand and downstream manufacturers. Rumors suggest that Apple may use sapphire for iPhone screen protectors, but recent reports indicate that the company might opt for Corning Gorilla Glass instead. This is because sapphire would cost around $40 for a 4-inch screen, which is significantly higher than the combined cost of Corning’s glass plus panels and touch modules.
Yan Xiangzhong, assistant general manager of Shangcheng Technology, noted that the main disadvantage of using sapphire for phone screens is the high cost. The manufacturing process is complex, involving about 18 steps from crystal growth to final processing, and yield rates are still low. “Each step in the window manufacturing process is expensive,†said a CTO from a sapphire substrate company. “Even if you add one layer at a time, it's difficult to make a profit.â€
Song Lei added that the high hardness of sapphire makes processing costly, and reducing costs remains a challenge. Some companies have tried entering the sapphire crystal lamp market, but the cost is higher than that of Swarovski products. Without brand value, sales have been tough.
“Sapphire is typically used in luxury goods,†said a sales representative from Shenzhen Jifeier Precision Machinery Co., Ltd. “We only do it when necessary, so shipments aren’t very large.†According to another company specializing in watch components, sapphire lenses for the optical industry are still in early stages, and mass adoption will take time.
Guo Yuebo mentioned that only mid-to-high-end watches priced above 1,000 yuan can afford sapphire mirrors. Top watch brands like Vacheron Constantin, Patek Philippe, and Omega often consider using sapphire for their watch faces or case backs. These luxury items can justify the current sapphire price, but shipment volumes remain small.
In addition to cost, sapphire has another major drawback: it is fragile. If it breaks, it can cause injury due to its sharp edges.
**Uncertain Market Outlook**
It is understood that sapphire is more demanding than laser or high-temperature materials in the military industry, but other applications require lower specifications. A military-focused sapphire chip company told reporters that their sapphire trims are generally used as windows.
Because of the lower requirements, mid-end watch manufacturers often use lenses that are 10%-15% cheaper than sapphire substrates. Only those selling to high-end watchmakers can achieve some level of profit. In this way, non-substrate sapphire is similar to the current LED sapphire market—focused on volume rather than margin.
Zhang Hongbiao, research director at the High-tech LED Industry Research Institute (GLII), noted that many sapphire companies entered the market seeking high margins but found it hard to exit. “It’s hard to explain to shareholders after leaving,†he said. While diversification is a positive direction, the gap between expectations and reality remains significant.
Despite the uncertainty, new entrants continue to enter the market. Yang Ping, general manager of Kang Blu-ray Co., Ltd., believes that sapphire’s diversified applications could be a key driver for the industry, potentially leading to a rebound in sapphire prices. Currently, sapphire is being used in various fields, including medical and mechanical industries, offering promising future prospects.
Recently, Russian sapphire manufacturer Monocrystal announced a 30% price increase for its substrates. However, domestic manufacturers are still cautious.
Guo Yuebo expects that with growing demand for LED lighting exceeding expectations, chip production capacity will begin to ramp up. In the early stages, substrate factories were affected by falling unit prices, and some had to shut down. But in the fourth quarter of this year, sapphire substrate prices are expected to stabilize or even rise slightly.
However, Song Lei remains uncertain about future price trends. Whether it's substrates or other applications that will drive the sapphire industry remains unclear.
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