Taiwan’s largest LED chipmaker, Epistar Corp (晶元光電), and the nation’s leading LED lighting and product supplier, Everlight Electronics Co (億光電子), look set to benefit this year from the faster-than-expected penetration of LED solutions into the general lighting market, thanks to their leading market positions, UBS Securities Pte Ltd said.
“We are positive on Epistar because we expect supply in the global LED industry to tighten this year after three years of severe oversupply,” UBS analyst Samson Hung (洪希民) said in a client note on Thursday.
Hung said that even though Epistar encountered a hiccup in sales late last year due to overbooking in the first half of the year, UBS believes that inventory digestion has come to an end.
After months of revenue declines, Epistar’s sales last month rebounded by 15 percent monthly to NT$2.02 billion (US$64.62 million) on rush orders from flat-panel backlight units and general lighting products, Hung said.
Epistar’s revenues for last quarter dropped 25.19 percent quarterly to NT$5.7 billion, after the third quarter declined 6.1 percent from the second quarter of last year.
Citing Epistar’s management, Hung said the rush orders from backlight units and general lighting products could continue this month because market inventory levels are low.
On an annual basis, Epistar last year reported NT$27.71 billion in revenue for the full year, an increase of 24.55 percent from the NT$22.25 billion recorded in the previous year.
This quarter, Epistar’s revenue might grow 19 percent quarter-on-quarter to NT$6.82 billion, including a contribution from Formosa Epitaxy Inc (燦圓光電), UBS said; adding that the firms’ merger took effect on Dec. 30 last year.
Over the longer term, rising demand for general lighting products and a more disciplined global capacity expansion will drive Epistar’s growth this year, Hung said, citing the firm’s strong technology capacity and solid patent portfolio, as well as continual improvement in the scope of global supply and demand.
Everlight is one of Epistar’s key customers in Taiwan and growth from its LED component business should remain solid this year, considering the rising LED penetration in general lighting and for outdoor display products as well as the higher adoption of flash LEDs for mobile phones, Hung said.
“We expect the continued growth of smartphones and increasing demand for flashlights to benefit Everlight, given its leading market share in the flash LED market,” Hung said.
Outdoor LED display products have higher margins, which would bring Everlight higher profitability this year, he added.
Hung said he also expects the firm to gain market share this year in the television panel backlight unit market because Everlight could offer packaged chips with higher luminance efficacy.
UBS forecast that Everlight’s annual revenue would grow 12 percent this year from NT$30.61 billion last year, with gross margin keeping at 24.4 percent.
Overall, the production value of the nation’s LED industry is expected to grow at a double-digit pace this year, as local suppliers are developing many other applications to boost shipments, the Taiwan LED Lighting Industry Association (台灣LED照明產業聯盟) said.
Association president David Su (蘇峰正) said on Friday that the output of the local LED industry is expected to grow to US$5.4 billion this year, up almost 15 percent from an estimated US$4.7 billion last year.
Su is also chairman of LED chipmaker Lextar Electronics Corp (隆達電子).
He said that local LED product suppliers will not only focus on the LED lighting market, but also extend their reach to a wider range of new applications, such as LED devices for automobiles and advertising signs, and even LED for architecture use.
Doing so will create more revenue sources, he said.
In Taipei trading on Friday, Epistar shares dropped 0.68 percent to NT$58, Everlight rose 2.16 percent to NT$75.8 and Lextar fell 0.48 percent to NT$30.8.
Additional reporting by CNA
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