Solar wafer producer LDK Solar will invest about $40 million to enter into the business of sapphire substrates used to make LEDs, which are likely to see higher demand as power generation costs and greenhouse gas emission concerns rise.

Solar companies, including LDK and GT Solar, are diversifying into other businesses to offset potential setbacks in their traditional business because of subsidy cuts in major markets of Europe.

LDK plans to build a new plant, with the capacity to supply two million two-inch equivalent pieces of sapphire wafers every year, in the Nanchang city of Jiangxi province in China.

"This new investment in manufacturing sapphire wafers has a great synergy with LDK's crystallization and wafer engineering and manufacturing expertise, and will enhance LDK's product offerings," Chief Executive Xiaofeng Peng said in a statement early on Friday. Because of their efficiency, LEDs are likely to see a rise in demand from television and lighting fixtures makers.

Last month, a joint venture led by Samsung Electronics tied up with Sumitomo Chemical for a $72 million venture to produce the substrates.