Mixed 2012 Forecasts for Taiwan's LED Industry

Strong Q2 results no guarantee for whole-year performance

Some data show Taiwan's LED industry to have a strong second quarter, but forecasts are mixed regarding the local industry's 2012 outlook.

Rush orders for LED backlights have boosted capacity utilizations as of mid-May for most of Taiwan's LED makers to an estimated 90%, up from 70% or so. The market research organization DisplaySearch predicts Taiwan's LED makers to see profit climb in the second quarter due to brisk demand; while revenue for the Taiwan industry is predicted at around NT$105 billion (US$3.5 million) in the second quarter, soaring 33% from the previous quarter and inching up 0.88% from the same quarter of 2011 or YoY.

Most of these manufacturers began seeing strong sales in April. Epistar Inc. had revenue of NT$1.51 billion (US$52 million), up 5% from a month earlier; FOREPI saw revenue rise 1% from the previous month, to NT$390 million (US$13.4 million); Genesis Photonics Inc.'s revenue soared 14% to NT$310 million (US$10.6 million), and Huga Optotech Inc. posted revenue of NT$195 million (US$6.7 million), up 15% from a month earlier.

Promising outlook on the second-quarter has motivated the island's LED chipmakers, including Epistar, Formosa Epitaxy Inc. (FOREPI) and Genesis, to restart expansion plans that were shelved since the second half of 2011, when capacity utilizations plummeted due to sluggish demand.

Such expansion plans will see Epistar raise capital through private placements; FOREPI to raise up to NT$2.5 billion (US$86 million) this year by floating new shares and convertible corporate bonds as well as syndicated financing; and Genesis to raise capital by issuing new shares.

Taiwan-based Photonic Industry & Technology Development Association (PIDA), a non-profit organization tracking the optoelectronics industry, predicts Taiwan's LED industry to generate 10% higher revenue this year relative to last year, to exceed NT$200 billion (US$6.9 billion).

Growth in 2nd Half
Such prediction is based on PIDA's 2012 expectation that the LED lighting market would start to grow in the second half due to the increasing number of exhibitors signing up for the Guangzhou International Lighting Exhibition heldJune 6-12, and LED Lighting Taiwan held 19-21.

The PIDA expects LED lighting to be a major driver of the global LED market this year fueled by climbing demand for energy-efficient products in the wake of the quake-tsunami in northeastern Japan, floods in Thailand, and general malaise and chaos in the American and EU economies that are sapping consumer confidence, hence motivating people to cut energy consumption.

Disaster-driven Demand
Demand for LED lighting in Japan after the Fukushima nuke plant disaster on March 11, 2011, for instance, has been rising and has the experts predicting penetration of such lighting to reach 38% in the nation by the end of this year.

Delta Electronics Inc. chief executive officer Y.J. Hai says that that power shortages in Japan and electricity rate hikes in Taiwan have doubled the company's LED-lighting sales in the first quarter compared with the same quarter last year, adding that many Japanese buyers had approached the company's booth at the 2012 Tokyo Lighting Fair, held in March, to inquire about LED lamps

Lextar Electronics Corp. chairman F.J. Su says that power shortage is forcing Japanese consumers to replace extensively-lit lamps with LED ones to save energy, adding that the company has won contracts from a heavyweight Japanese buyer after landing an order for up to 400,000 LED light tubes from Japan, and that influx of orders from Japan will keep the company's production lines busy throughout June.

Public work projects in China will create an estimated demand for some 1.22 million LED streetlights this year alone.

Higher electricity rates in Taiwan may sting consumers, but ring up also higher sales for makers of energy-efficient lights such as LED lamps in Taiwan, with the Taiwan government's plan to replace 326,000 conventional streetlights islandwide with LED lamps to further drive business for the industry.

LEDInside, another market consulting firm based in Taiwan, believes the Taiwan industry's revenue for 2012 will grow an annual 8%, without ruling out the possibility of reducing such prediction, mainly due to the uncertain global economy, rising replacements of LED backlights for OLEDs in high-end mobile phones, and reduced application of LEDs in TV backlights on cost concern.