LED firms Epistar Corp (晶電) and Lextar Corp (隆達) are planning to restructure under a holding company, which analysts said would help them compete with rivals, through improved technologies and sound financial structure.
Epistar and Lextar on Thursday announced plans to establish a holding company through a share swap, with the firms becoming 100 percent-owned subsidiaries of the new entity, but they would continue to operate independently.
Epistar is one of the nation’s leading suppliers of LED epitaxial wafers and chips, while Lextar makes LED modules and provides downstream packaging services.
“By forming a holding company, Epistar and Lextar are now able to jointly bear the enormous burden of investing in new equipment, in turn lowering their operational risk and helping them gain a foothold in the market for new types of displays,” market researcher TrendForce Corp (集邦科技) said in a note on Friday.
The new holding company would also have a sound financial structure, Yuanta Securities Investment Consulting Co (元大投顧) said in a separate note.
Shares in Epistar on Friday fell 1.71 percent to NT$37.45 in Taipei trading, while Lextar shares rose 5.14 percent to NT$20.45.
The partnership is aimed at enhancing their research and development (R&D) in new technologies such as mini and micro-LEDs, 3D sensing and III-V compound semiconductors (compounds made using elements listed in columns III and V of the periodic table), as well as integrate their resources to improve competitiveness and avoid overlapping investments, the companies said in regulatory filings.
The firms have set Oct. 20 as the share swap date, with one common share of Epistar or Lextar exchanging for 0.5 or 0.275 common shares of the new holding company respectively, their filings show.
Epistar and Lextar would then delist from the Taiwan Stock Exchange, and the new holding company would list on the main exchange with NT$6.86 billion (US$231.29 million) in capital, the filings said.
The firms plan to hold their respective shareholder meetings on Aug. 7 to vote on the deal, which is also pending approval from anti-trust authorities in Taiwan and China, they said.
Epistar has worked with US clients for mini-LED-related products, and its mini-LED backlight products for notebook computers and tablets are expected to start shipping next year, Yuanta said.
Lextar earlier this year worked with LCD panel maker AU Optronics Corp (友達光電) and gaming PC maker Micro-Star International Co (微星科技) to launch the first mini-LED-backlight notebook computer, it said.
With commercial opportunities for micro and mini-LED technologies rising, leading clients such as Apple Inc and Samsung Electronics Co have high hopes for these two emerging display technologies in their products, TrendForce said.
However, as Taiwanese LED manufacturers have over the past few years suffered continuous losses, most of them can no longer afford to expand production capacity on a large scale to meet demand, let alone contend with increasing competition from Chinese LED chipmakers and LED packaging companies, the Taipei-based researcher said.
Through the holding company, Epistar and Lextar would account for 12.43 percent of global LED chip production capacity, TrendForce said, adding that their partnership is expected to create a total vertical integration throughout the entire LED industrial supply chain.
“Given that both companies have been actively investing in mini-LED backlight R&D, the collaboration between Epistar and Lextar will serve to reduce their competition with each other over client orders as mini-LED backlight demand from panel manufacturers and branded end-product [original equipment manufacturers] skyrockets,” TrendForce said.
Jih Sun Securities Investment Consulting Co (日盛投顧) is neutral about the new holding company’s outlook and expects it to have little effect on the overall LED market.
“Although the cooperation between Epistar and Lextar is conducive to the integration of each other’s resources and the integration of upstream and downstream technologies (which is conducive to the development of mini-LED technology), Taiwanese LED companies have in recent years faced price competition from Chinese makers, and the forming of a new holding company still cannot change the competition situation in the low and mid-end LED segments,” Jih Sun said in a note.
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