Beijing has in recent weeks launched a series of anti-trust investigations to ramp up pressure on foreign companies to cut prices under its six-year-old anti-monopoly law.
Foreign car companies have been under scrutiny for possible “vertical” infractions of China’s 2008 Anti-Monopoly Law, by allegedly fixing the retail prices charged by their downstream dealers and service providers.
Earlier this month, a senior official at the National Development and Reform Commission, which polices companies’ pricing practices, said Volkswagen unit Audi and Chrysler of the US had been found guilty of unspecified violations.
However, the Chinese government is unlikely to subject foreign LED players to antitrust fines similar to those on foreign automakers and technology suppliers, Primasia Securities Co said.
“Chinese LED players together enjoyed a high combined market share of about 68 percent in their home market in 2013,” Primasia analyst Filia Lin said in a note on Friday, citing statistics provided by LEDInside, a research division of Taipei-based market information advisory firm TrendForce Corp (集邦科技).
Lin said that in the packaging market, foreign firms such as Nichia Corp, Cree Inc, Everlight Electronics Co (億光) and Philips Lumileds Lighting Co together accounted for about 25 percent of the market last year, with the rest dominated by local players in China.
Moreover, for LEDs used in the same application, average selling prices of Chinese LED products are often 10 percent to 20 percent lower than their Taiwanese peers, leaving aside the question of product quality, she said.
“Therefore, the greater threat, in fact, lies in the prospect of Chinese LED peers fighting for more sales and market share by using cheaper LEDs,” Lin added.
Lin’s remarks came after Taiwan’s LED shares were hit on Thursday by rumors that the Chinese Ministry of Commerce was considering raising tariffs on LEDs to 10 percent from 4 percent and planning an antitrust investigation of international LED players.
Taiwanese LED firms on Friday denied the rumors, saying that there is no import tariff for LED upstream chips and packaged LEDs shipped from Taiwan.
Companies added that they generally sell upstream chips and packaged LEDs to subsidiaries or clients in China, which then assemble the chips into modules or end products in plants there.
In addition, most Taiwanese LED players are also expanding their capacities in China in case the Chinese government decides to impose tariff on LEDs in future, they said.
Shares in Everlight, the nation’s top LED chip packager, rose 5.18 percent to close at NT$65 (US$2.17) and those of Epistar Corp (晶電), the nation’s largest LED chipmaker, stayed unchanged at NT$61.4 on Friday, an indication that investors had ignored the market rumors.
However, Primasia said Everlight would still face greater downward risk from a slowing demand for TV LEDs in the second half of the year compared to its local peers, as the company has a higher sales exposure to TV LEDs.
In addition, the company’s lighting business also encounters intensifying competition in the consumer market as well as the potential conflict between its own brand and contract-making business, the brokerage said.
“Everlight will witness more margin pressure from product mix change and intensifying competition from global lighting brands. We thus suggest investors stay on the sidelines at the moment,” Primasia said.
However, Primasia said that “Epistar will reap more benefit from the uptrend of lighting and continuous outsourcing from tier-one lighting brands. We suggest long-term investors accumulate on weakness.”
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