2012 worst year ever for LED chip-makers

The China Post news staff

TAIPEI, Taiwan — All local LED epitaxial chip-makers suffered their worst-ever business performances in 2012, with market leader Epistar Corp. posting the largest loss since it was listed on the Taiwan Stock Exchange in May 2001, according to industry sources.

Although the overall LED lighting and backlighting market scale continued expanding in 2012, local makers of LED chips were plagued by sluggish market demand amid an economic slump and excessive supply of such chips. As a result, Epistar and the other two listed makers, namely Formosa Epitaxy Inc. and Genesis Photonics Inc., all reported the worst business records seen since their listing on the local bourse.

Epistar, for instance, reported an after-tax operating loss of up to NT$2.33 billion for 2012, making its EPS fall to minus NT$1.3 — both the worst records of their kinds seen since the firm’s listing in 2001. Epistar’s reinvestment loss accounted for the majority of its total loss for last year, reaching NT$1.49 billion.

One of its reinvested firms is Tekcore Co., Ltd., a leading local maker of LED wafers and chips. Tekcore, suffered an after-tax loss of NT$730 million, for an EPS of minus NT$2.65 and a gross profit margin of minus 23.62 percent. Another reinvestment is Huga Optotech Inc., a maker of high-brightness LED indicators. Huga, fully acquired by Epistar in 2012, once suffered a gross margin rate of minus 100 percent last year, forcing Epistar to send 30 engineers to station in Huga to help reduce product defect rate. As a result, the gross margin rate gradually improved but still posed a negative level of minus 20 to 30 percent last year.

Meanwhile, Formosa Epitaxy Inc., a major maker of InGan LED chips, also recorded a negative gross margin, at minus 0.97 percent last year, with its after-tax loss reaching NT$594 million for an EPS of minus NT$1.25.

The company attributed its loss mainly to the drastic shrinkage in market demand seen in the fourth quarter of last year, which, in turn, caused makers to sharply cut prices to vie for orders, thus worsening the firm’s profit performance.

Plagued by the same problems, Genesis Photonics Inc., a specialized maker of LED EPI wafers and chips, also ended 2012 with operating deficits. Although the firm managed to a record gross margin rate at a positive level of 2.8 percent, it posted an after-tax loss of NT$715 million and an EPS of minus NT$2.58, also its worst performances, due mainly to high operating costs.

Most makers shared the view that they are facing another tough year in 2013, but they expected a more orderly market and a slowdown in price declines in the year.