There is also widespread litigation. On May 9, the US International Trade Commission found Epistar infringed two patents owned by Lumileds Lighting International BV, a unit of Royal Philips Electronics NV.
The commission banned imports into the US of some of its chips, Epistar said in a press release.
Nichia Corp in April last year settled out of court a lawsuit filed in 2005 against Epistar and Everlight in Tokyo District Court to stop the Taiwanese firms from selling some of its products in Japan.
Despite the hurdles, shares of manufacturers Citizen Holdings Co, Toyoda Gosei Co and Stanley Electric Co of Japan, as well as Epistar and Everlight have beaten global electronics stocks and their national stock indexes this year.
"In the short term, investors may see LED stocks as overvalued and could reduce holdings," said Kevin Yang (楊師銘), who manages NT$200 million at Paradigm Asset Management (華頓投信), including Epistar and Everlight. "In the long term, the industry has growth momentum. First it's notebooks, then it will be TVs."
Taiwanese and Japanese companies claim about two-thirds of the global market for LEDs, said Deutsche Bank AG.
Nichia is the leader, along with Toyoda Gosei, minority-owned by Toyota Motor Corp, and Durham, North Carolina-based Cree Inc.
"Current P/E ratios don't yet reflect next year's revenue growth," said Eric Wei (魏恆祥), who helps manage NT$7 billion at Fubon Securities Investment Trust Corp (富邦投信), including LED makers.
"Share prices have risen a lot, but this year is just the start," Wei said, adding that Fubon plans to hold onto its Epistar and Everlight shares and is looking for more LED investments.
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