Epistar Corp (晶元光電), the nation’s top LED chipmaker, yesterday said it is to spend 64.84 million ringgit (US$14.63 million) to invest in a Malaysian LED packaging company in a bid to expand its product distribution overseas.
The Taiwanese company inked an investment agreement with Dominant Opto Technologies Sdn Bh on Monday to acquire 11 million common shares of the Malaysian firm, Epistar said in a filing with the Taiwan Stock Exchange.
“Epistar hopes to accelerate the market’s acceptance of our new products and increase the sales exposure of Epistar’s products in the market through this strategic cooperation with Dominant Opto Technologies,” it said.
Epistar expects the deal to increase its revenue and profit, the company said.
The shares purchase will take place after the two firms undergo required legal procedures, Epistar said, without disclosing the scope of its ownership in the Malaysian firm after the deal takes effect.
Yuanta Securities Investment Consulting Co (元大投顧) analyst Andrew Chen (陳治宇) said that the rationale behind Epistar’s strategic move is more important than the potential sales contribution from the investment.
“Given the small amount of investment in the Malaysian company, I expect the investment would not have a significant impact on Epistar,” Chen said by telephone.
Epistar’s decision to tap into the LED packaging industry suggests that Taiwan’s LED upper stream is facing rising competition from their Chinese peers in the global market, Chen said.
This year, China’s LED chipmakers have started to shift their focus away from the Chinese market and increase their exposure in other countries, a move that has negatively affected Taiwanese LED upstream suppliers, Chen said.
As the competition from Chinese firms will only intensify in the years ahead, Epistar may suffer from weaker pricing and market share loss, Chen said.
He expects the firm to pursue technological advances to differentiate its products from its rivals and increase the number of investments in the LED downstream supply chain to improve its footing in the market.
“Integrating the upper stream and downstream supply chains can help Epistar to get closer to its clients,” Chen said.
Epistar’s combined sales totaled NT$17.44 billion (US$526 million) in the first eight months, down 11.57 percent from last year’s NT$19.72 billion.
The company’s revenue in the second half is likely to be flat from the first half’s NT$13.41 billion, Chen said.
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