Tue, Jun 19, 2007 - Page 12 News List

Prospects bright for LED makers: analysts

By Jason Tan  /  STAFF REPORTER

The outlook for the nation's light-emitting diode (LED) sector is promising, thanks to a pickup in demand for small panels and widening LED applications, research reports said.

"Among component stocks, we are most positive on the upstream LED sector," Citigroup Global Markets Ltd said in last week's report detailing its Asian technology outlook in the second half of the year.

The company said it had turned positive on the nation's LED supply chain given a better fundamental outlook over the next 12 months.

Although shipments of notebook computers and televisions employing LED are still small, the momentum is expected to pick up from the current quarter through the first quarter next year, it said.

Prospects are turning up thanks to the rising demand for small panels, with LED increasingly becoming the main backlight source, as well for enlarged LED use in displays or decorative lighting, Citigroup said.

Citigroup listed Epistar Corp (晶元光電), the nation's biggest LED chipmaker, as well as LED packager Everlight Electronics Co (億光), as its two main stock picks.

"Supply consolidation and disciplined capacity expansion should translate into pricing power for upstream LED chipmakers, yet the market seems to be overlooking Epistar's earnings momentum," it said.

Epistar posted a strong 63 percent rise in May sales to NT$947.7 million (US$28.5 million) from the same period last year, while sales for the first five months were up 50 percent to NT$3.6 billion.

Epistar and Everlight were also added to the stock watch lists of Merrill Lynch & Co, which initiated coverage on Taiwan's LED sector last month with a "positive long-term" view.

"The Taiwanese LED industry is well-positioned to capture growth," Merrill Lynch said in a report on May 29.

Taiwan LED suppliers, which are second only to Japan in terms of market share, will continue to grow in scale and importance by taking advantage of their proximity to and cooperating with major local handset, notebook computer and liquid-crystal-display panel makers, Merrill Lynch said.

But packaging companies such as Everlight should not let their guard down.

The LED packaging area is becoming increasingly competitive and the key differentiating factors will be process yield technology, relationships with upstream chip suppliers and production scale size to secure allocation, Merrill Lynch said.

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