Strained Tekcore Scrambles for More Production Capacity

Taipei, May 17, 2010 (CENS)--Taiwan's LED chipmaker Tekcore Co. Ltd. will persistently expand production capacity to cope with flooding orders, which have inundated the company's production lines, according to company president Jonathan Lu.

Lu pointed out that a deluge of LED orders for TV backlights and lighting applications has already strained the company's production lines, prompting the company to increase the number of metal organic chemical vapor deposition (MOCVD) machines to 46 by the end of this year from 38 systems recorded in the second quarter.

He noted that the company's shipments of backlight chips to South Korea and Japan would surge to account for half of the company's total shipments of such chips this year, a huge jump from last year's 20%.

Strong market demand inspires Lu to forecast that the company's revenue for this year will likely double last year's level to NT$2.6 billion (US$81 million at US$1:NT$32). He added that the company's expansion plan does not rule out the possibility of setting up a plant in mainland China as the mainland authorities are offering lucrative incentives for the investments.

Fearing the company's overdependence on Samsung for backlight-chip orders, some institutional investors warn that Samsung's development of in-house production of LED chips could eventually impact Tekcore's shipments. Lu responded that Samsung's in-house capacity remains far short of its demands, suggesting Samsung's in-house production scheme would not affect his company's business in short term. Furthermore, lighting applications, he added, would rise to become another demand driver after backlight applications.

Production is another issue as supplies of sapphire and some special gases used in the production of the chips are outnumbered by demands, having driven up prices of sapphire, the basic substrate in the manufacturing, by 20-30% since early this year. Lu said his company would secure steady supply sources of the materials by signing long-term contracts with some sapphire-substrate suppliers.

Lu noted that supply-demand imbalance in the market of sapphire for 2-inch LED epitaxy wafers is widening than the imbalance of the material for 4-inch epi wafers, prompting the company to boost capacity of 4-inch wafer production.