3 January 2011

Epistar expects 25–30% growth in 2011; plans $280m bond issue

After experiencing weakening demand and falling prices in fourth-quarter 2010, Taiwan’s largest LED chipmaker Epistar Corp will resume its growth momentum in first-quarter 2011 in view of rising component re-stocking in China and South Korea, reckons analyst firm Primasia Securities Co according to a report in the Taipei Times. “We forecast the company’s sales to grow by 25–30% year-on-year in 2011,” the firm says in a client note.

After the increasing installation of new metal-organic chemical vapor deposition (MOCVD) reactors by companies in 2011 as well as a parity between supply and demand in the LED sector, Primasia forecasts that average selling prices (ASPs) for LEDs may drop by 10–15% in 2011. To offset this trend, Epistar aims to grow its sales of high-margin LEDs for TV and lighting application by 55–60% in 2011 (compared with growth of 40–45% in 2010), Primasia says. Previously, on 3 December, Epistar’s VP of finance & accounting Rider Chang said that LED lighting accounts for about 20% of the firm’s sales and backlighting about 50%.

Last month, JPMorgan said that Epistar is in the process of shifting its focus from TV backlights to lighting applications and is undertaking a rapid change in product mix in order to sustain growth in earnings.

Also, in a stock exchange filing on 23 December, Epistar announced that its board has approved a plan to issue (over the next two years) zero-interest five-year euro convertible bonds (ECBs) worth US$280m, mainly for paying back previous US dollar-based loans and for future equipment purchases.

In particular, Epistar is investing an extra US$19.5m in United LED Shan Dong Corp, the joint venture established in China’s Shandong Province last March with Taiwan’s second largest silicon wafer foundry United Microelectronics Corp (UMC, which has a 15% stake in Epistar). Epistar’s investment in the joint venture will hence total US$27.5m (after the two partners initially invested US$8m each), boosting its stake from 50% to 55%.

Despite worries of over-supply in the LED industry in 2011, Epistar says that short-term changes in terms of seasonality and supply–demand issues are hard to avoid, and it remains optimistic about future potential LED market growth (particularly due to continued growing demand for LED lighting), according to a report in Digitimes. The firm believes it should start funding capacity expansion for future demand, so that it will have enough capacity to handle orders when they arise.

Tags: Epistar LEDs MOCVD

Visit: www.epistar.com.tw

Visit: www.unitedled.cn

Visit: www.taipeitimes.com

Visit: www.digitimes.com