Taiwanese suppliers Epistar Corp (晶電) and Everlight Electronics Co (億光) are expected to benefit from a technology improvement in LED packaging, according to Morgan Stanley.
The US brokerage said the increasing adoption of flip-chip LED packaging in direct-light TV models this year bodes well for leading LED chipmakers and packagers, generating higher average selling prices and profit margins from TV backlight applications.
The flip-chip LED packaging allows lower LED usage in backlight modules, compared with traditional lateral packaging, and helps reduce the backlight thickness, said Sharon Shih (施曉娟), a Morgan Stanley analyst in Taipei.
This gives leading suppliers a greater competitive edge over second-tier players, she said.
“Flip-chip LED requires higher capability at both the level of LED chip production and packaging,” Shih said.
“Our checks suggest that only leading players like Epistar, Formosa Epitaxy Inc (璨圓) and Everlight are currently capable of producing and generating higher margins [on reasonable yield],” she wrote in a research note dated Friday last week.
The analyst gave Epistar an “overweight” rating and Everlight an “equal-weight,” saying that the two companies are likely to benefit from the technology shift.
According to research institute LEDinside, direct-type LED TVs became the mainstream last year because they use half the number of LEDs compared with edge-type LED TVs.
Direct-type LED TVs are expected to make up 60 percent of global LED TV shipments this year, surpassing edge-type LED TVs for the first time.