LED chip supplier Formosa Epitaxy Inc (ForEpi, 璨圓光電) is expected to see its sales pick up this year from last year due to increasing shipments of flip chip products, First Capital Management Inc (第一金投顧) said in a note on Monday.
However, the company may stay in the red this year because it still has huge operating expenses, as well as issues with equipment depreciation, the Taipei-based equity consultancy said.
“ForEpi will still have to improve control over its operating expenses to fully improve its businesses,” First Capital said.
ForEpi’s sales are forecast to increase 12.23 percent to NT$4.89 billion (US$162.94 million) this year from an estimated NT$4.36 billion last year, with a negative gross margin of 6.31 percent, while net loss is likely to decline to NT$1.02 billion, or NT$1.7 per share this year, from NT$1.21 billion, or NT$2 per share, last year, according to First Capital.
ForEpi chairman Chien Fen-ren (簡奉任) reportedly told local media recently that he expected the company to make a profit this year. Until the third quarter of last year, the company had posted losses for eight consecutive quarters since the fourth quarter of 2010.
The company has continued growing its LED chips used in backlight and lighting products and it is one of three Taiwanese LED chipmakers that can supply flip chip products for TV use, local media reported.
“Flip chip has the potential to become a mainstream TV component, given its radiating feature and smaller size, which can help TV makers to produce TVs that are lighter and slimmer,” First Capital said in the note.
If the company’s products can receive certification from Samsung Electronics Co and it can secure more orders from Chinese firms, ForEpi is expected to improve its gross margin from the second quarter of next year, First Capital said.
In a separate note, Yuanta Securities Corp (元大證券) analyst Andrew Chen (陳治宇) forecast ForEpi’s sales of its flip chip products would account for 15 percent to 20 percent of the company’s total sales this year.
The high-margin flip chip products would likely lift the company’s gross margin to more than 20 percent this year, Chen said.
Separately, worldwide demand for LED lights is set to soar this year as prices fall and they become more competitive with conventional lighting, a market research firm said.
“The global LED lamp replacement wave has arrived,” LEDinside said in a research note.
Global demand for LED bulbs and LED tubes is set to increase by 86 percent and 89 percent this year respectively, from a year ago, the firm said.
LEDinside analyst Terri Wang said the strong demand resulted from lower prices, with LED products falling to “levels similar” to conventional lights.
Falling prices have considerably shortened the period needed to recoup the cost of LED bulbs, making it more cost effective for commercial and public venues to replace less efficient bulbs, Wang said.
Special projects and subsidy programs in regional markets have made a significant contribution to the rise in LED lighting penetration, Wang said.
The Energy Star subsidy program is still carried out in various parts of North America, and the subsidies have made the price of LED lights more palatable to consumers, the analyst said.
Elsewhere, national policies barring incandescent lamps have helped the LED lighting market to develop, Wang said.