TOKYO, JAPAN: Samsung LED and Japan's Sumitomo Chemical have agreed to set up a $72 million joint venture in Korea to produce sapphire substrates used to make light-emitting diodes (LED).

The move comes as global manufacturers from electronics firms to carmakers seek to diversify their supply chains after the devastating earthquake and tsunami that hit Japan March 11 raised concerns that supplies of key components may be severely affected.

U.S.-based Rubicon Technology Inc , a major LED wafer supplier, said recently it was seeing increased demand for substrates from Japanese customers after the earthquake.

Samsung LED, a joint venture between Samsung Electronics and Samsung Electro-Mechanics Co Ltd , said the investment plan was not related to the earthquake and was aimed at securing stable supply of wafers to produce LEDs.

"The venture will help Samsung enhance our LED competitiveness by vertically integrating production of key components, and will replace imports of such products," Samsung LED said in a statement.

LED a power efficient technology

LED technology is power-efficient and is widely used for flat-screen backlights, interior lighting, traffic signals and automobiles. It is poised to unseat incandescent and compact fluorescent lightbulbs as governments, businesses and consumers seek to cut electricity costs and curb emissions.

LEDs are manufactured by slicing sapphire ingots into thin sheets that are processed into sapphire substrates, which are then coated with a luminescent layer.

The venture, which will compete with major suppliers such as Rubicon and Russia's Monocrystal, will build a plant this year and mass production will start from early 2012, Samsung LED said.

The market for LED wafers is seen growing nearly 70 percent to $927 million this year and to $1.3 billion by 2021, according to research firm Displaybank.