Indium:

Supply, Demand & Flat Panel Displays

Brian O'Neill

AIM Specialty Materials

25 Kenney Drive

Cranston, Rhode Island 02920 USA\
www.aimsolder.com

*Presented at Minor Metals 2004, London, June 2004*

Indium Market

Indium is a minor metal that commonly occurs as an impurity in zinc and,
to a lesser extent, in tin, lead and copper. The abundance of indium in
the earth's crust is believed to be equivalent to the occurrence of
silver, however, the similarities end there. The development of
commercial scale silver applications, production, fabrication and
recycling spans over centuries. Meanwhile, commercial scale applications
of indium began to develop only over the past 2 or 3 decades. During
this time the relatively thin supply base and low demand of indium has
contributed to significant price instability over the past 20 years. The
price instability coupled with relatively small worldwide consumption of
indium is the reason why relatively few zinc producers bother to extract
indium.

In late 2002 indium prices hit a low of \~ US\$60.00/kg. At that point
French zinc producer Metaleurop closed their zinc refinery in northern
France. As a consequence, the indium circuits at this plant were also
closed causing the loss of \~ 60 tons per year of primary indium
production. Simultaneously the demand for indium consumed by the LCD
industry started to rise rapidly while the more traditional applications
for indium continued to grow at more modest growth rates in the range of
5 to 8% per year. These events caused the tightening of indium supply
and subsequent steep price increases experienced over the past 16
months. During 2003 the supply of primary indium was impinged further by
the closure of several mines in the Nandan region of China. This
contributed to a shortage of indium bearing concentrates available to
refiners in Asia. The net result of these circumstances was an indium
price exceeding US\$600.00/Kg.

![](media/image1.wmf){width="4.611111111111111in"
height="3.6145833333333335in"}

Indium and LCD's

While indium has many niche applications, flat panel displays have
quickly grown to become the primary end user of the world's indium
production. The dominant flat panel display technology is the LCD or
liquid crystal display.

![](media/image2.wmf){width="4.121527777777778in"
height="3.0965277777777778in"}

The fabrication of an LCD leverages technologies perfected by the
semiconductor industry. Like semiconductor chips, the production of an
LCD involves the fabrication of an array of thin film transistors via a
series of metal deposition, lithography and etch steps. Unlike silicon
chips, a TFT-LCD array must be transparent. Doped indium in the form of
indium-tin oxide (ITO) thin films have the unique properties of being
optically transparent and electrically conductive. In addition to these
physical properties, ITO films have other key attributes, including:

-   ITO films are very uniform when applied to glass via physical vapor
    deposition. Film uniformity is critical to large area LCD's.

-   ITO films etch rapidly & uniformly in the lithography/etch processes
    used to fabricate LCD's.

-   ITO films are stable and have a very long life in LCD structures

![](media/image2.wmf)

While there are many other metal-oxide transparent conductors which find
use in a range of industrial applications, the set of properties
critical to LCD's make indium based thin films uniquely suited to LCD
applications. It is not out of the question that some novel material
sets could be developed as replacements for ITO, however, this not a
likely scenario in the near term. Any change would require significant
research/development, life testing, process changes and equipment
changes.

COST STRUCTURE OF LCD's

An LCD is a capital intensive product therefore production yields
dominate the cost structure. In 2004 alone LCD makers are expected to
invest a record of close to US\$10 billion in new LCD fabs^1.^. Overhead
costs are applied to each glass substrate as it passes through the
fabrication equipment. The number of good LCD panels yielded per glass
substrate has a significant impact on the net cost per panel. This drive
to maximize the number of LCD panels per substrate is evident in the
investment being made in next generation LCD fabs. Early generations of
LCD fabs utilized glass substrates that were \~ 500mm square while
current fabs utilize glass that is \~ 1.5 meters x 1.8meters. By 2006
the substrate size will exceed 2 meters.

In terms of the cost structure of an LCD panel, the cost of ITO per
panel is insignificant. Even at today's elevated indium prices, the cost
of indium that is applied to a 32" LCD panel would be \<US\$0.55. Even
if indium prices were to double from present levels, the indium
cost/panel would be \~US\$1.00 on a product that retails for
\>US\$3,000. For reasons detailed earlier it is reliable supply of
indium, not cost, that is most important to the LCD fabs.

INDIUM SUPPLY / DEMAND FORECAST

Figure d. is a summary of estimated refinery capacity & actual
production vs. forecasted demand. This estimate of the supply-demand
balance shows a deficit of supply vs. demand in 2003 with the deficit
situation worsening as demand from the LCD sector escalates through
2006. Total indium demand outstrips worldwide *primary* production
*capacity* in 2004. This estimate assumes the shortage of indium bearing
concentrates will persist in China, keeping worldwide primary production
at \~ 75% of refinery capacity. Recent news reports indicate the planned
addition of \~ 30 tons per year indium refining in Korea. According to
reports this new capacity will come on-line sometime in 2005. It remains
to be seen whether this new production capacity will absorb indium
bearing concentrates that are already being recovered at existing
refineries, therefore it is difficult to estimate the impact of this
project at this time.

![](media/image3.wmf)

At present the deficit balance of indium that is required is being
supplied via recycling of scrap ITO targets. As noted in figure b,
indium based thin films now account for \~ 75% of world indium demand.
The bulk of these films are produced via physical vapor deposition, a
process commonly referred to as sputtering. This process uses indium in
the form of ceramic ITO sputtering targets. While this process is well
suited to the high rate production of uniform ITO thin films, it is very
inefficient in terms of sputter target utilization. While target
utilization rates vary, as little as 15% of a given target is actually
deposited on the substrate being coated. The balance of the ITO resides
as scrap streams in the form of spent targets, ITO films on the coating
chamber walls and ITO bearing solutions generated by the etch processes
at LCD fabs.

Demand / Price Instability

From 1999 through 2002 indium prices steadily eroded due to increasing
indium production from China coupled with inconsistent demand from the
LCD sector. The inconsistent demand was driven by the boom & bust cycle
of the LCD business through the late 1990's into the early 2000's.
During this time the largest applications for LCD panels were notebook
computers and cell phones therefore ITO demand was tied to the
replacement cycle of these products. As this situation persisted, indium
availability continued to climb while prices sank, leaving little
incentive to invest in ITO recycling or new primary production capacity.
In late 2002 and 2003 the market dynamics shifted on several fronts:

On the demand side the cost reductions afforded by next generation LCD
fabs were opening new markets for LCD panels: desktop monitors and
LCD-TV's. The present market saturation of LCD-TV's vs. CRT's is less
than 5%, allowing for many years of strong growth in LCD demand.
Simultaneously, the traditional LCD markets were entering a strong
replacement cycle: IT spending was on the increase while notebook
computers with wireless internet capability were entering the market.
Meanwhile, next generation mobile phones with attractive new features
(camera phones, wireless internet, PDA functions) were pushing the
replacement cycle for handsets. These developments fueled high growth in
indium demand.

On the supply side, the loss of Metaleurop's production coupled with the
mining problems in China lead to a drop in primary indium production
available to the market. Compounding the problem was the lack of
investment in ITO target recycling. Until late 2002, indium had become a
commodity with constant downward price pressure, providing little
incentive for investment in recycling activities. As indium supply
tightened and prices spiked there was renewed interest and investment in
recycling. The supply chain now recognizes that the recycling of scrap
ITO is a critical component of indium supply and will allow indium to
remain viable to both the LCD market and the more traditional uses of
indium.

SUMMARY

Indium's primary end use, the LCD, has entered a period of long term
growth. No longer tied to one end market, the LCD industry is expected
to achieve annual growth rates exceeding 30% over the next 3 years.
LCD-TV's have captured just 5% of the market for televisions. As 6^th^ &
7^th^ generation LCD fabs reach capacity we can expect LCD-TV prices to
decrease significantly, boosting demand dramatically. This will provide
steady and significant growth in the demand for indium. Meanwhile,
non-LCD related applications for indium will continue to grow at \~ 5%
per year.

Improvements in the speed & efficiency of ITO recycling coupled with
primary indium production will provide sufficient indium for all
applications & will eventually bring about price stability.

*References:*

^1.^ Wall Street Journal, 5/27/04, "I Want My Flat TV.Now", E. Ramstad

Figures a, b, d: *AIM market research*

figure c: *J.Kester, "Large Area Indium Tin Oxide Film Manufacturing
Technology", MRS Workshop on Transparent Conducting Oxides, June 2000.*