Epistar Corp (晶電), in a historic shift in the 21-year-old company’s history, announced that it plans to spin off two of its three main business units by the end of this year.
The company, which is one of the nation’s leading suppliers of LED epitaxial wafers and chips, said that the restructuring is mainly motivated by large potential growth in new LED applications and III-V compound semiconductors — compounds made using elements listed in columns III and V of the periodic table.
The move is in line with a strategy to diversify its businesses and would maximize returns for both shareholders and investors, Epistar president M.J. Chou (周銘俊) said.
The Hsinchu-based company announced the spin-off plan at an investors’ conference on Wednesday last week.
Under the plan, Epistar would spin off a unit that makes epitaxial wafers for vertical-cavity surface-emitting lasers (VCSEL) and gallium nitride chips, Chou said.
It would also spin off a unit that produces chip-scale packaging LEDs, mini and micro-LEDs, sensing devices and III-V compound semiconductor-based solar cells used in satellites, he said.
Epistar itself would focus on manufacturing aluminum gallium arsenide, which is used for producing high-brightness red and infrared LEDs, blue-light LEDs and diode laser systems for medical purposes, he added.
The company’s board of directors has approved the plans and the restructuring should be completed within the next six months, Chou said.
The two spin-offs might go public in 2021 or 2022 after securing strategic investors, Epistar chairman Lee Biing-jye (李秉傑) said.
“We do not expect any financial impact from the restructuring as the company would still wholly own the two spin-offs in the initial period,” Taishin Securities Investment Advisory Co (台新投顧) analyst Wong Ting-wei (翁廷維) said in a client note on Thursday.
Epistar has been focusing more on the VCSEL business, as well as on mini and micro-LEDs, in light of growing pricing pressure on blue-light and infrared LED chips from Chinese rivals, the company said, but added that contributions from these new businesses would likely be limited this year.
In the first quarter, consolidated revenue fell 10.2 percent year-on-year to NT$5.15 billion (US$171.98 million), and gross margin contracted by 2.5 percentage points from a year earlier to 17.2 percent due to the slow seasonal effect and the declining average prices of blue-light products.
However, thanks to a one-off tax benefit of NT$271 million, net profit was NT$400 million last quarter, compared with a net loss of NT$281 million a year earlier, with earnings per share of NT$0.37.
The business would remain under pressure this quarter, as a supply glut continues and major clients work to adjust inventories, SinoPac Securities Investment Service Co (永豐投顧) said in a note on Thursday.
SinoPac forecast revenue to increase 19.2 percent this quarter from last quarter, but gross margin could fall to 16.8 percent due to falling average prices, while net profit is to decline 73 percent quarter-on-quarter, with earnings per share of NT$0.1.
“Overall, we expect the company to benefit from the depletion of excessive inventory by clients and the launch of new mini-LED products in the second half of this year, with the second quarter likely to be the trough this year,” SinoPac analyst Liao Kuan-chieh (廖貫捷) said in the note.
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