Epistar Receives Orders of Japanese LED Car Lights to be Shipped in Next Q1

According to reports, Epistar won orders of Japanese LED car lights, it is the first time for Taiwan-based LED chip manufacturers to enter into high-threshold and high-profit car lights supply chain. It is expected to begin a small shipment early next year. Meanwhile, Epistar also won Samsung's and LG's new TVs certification; also they will be shipped in Q1 of next year.

Legal persons pointed out that Epistar has accessed to the Japanese car supply chain and received orders of brake lights and turn signals, the major markets are in Asia, mainly focusing on Japan. LED lighting market has been gradually expanded, but the price competition in general lighting is very intense so that manufacturers intend to open up niche market. The profit in automotive lighting market is good and product life cycle is long, so all LED manufacturers from downstream, midstream and upstream industry are hoping to enter. Investment adviser from Primasia Securities Limited estimates that the gross margin in automotive lighting market exceeds 40 percent, while Epistar and Everlight only achieved the overall gross margin of 15% in the second quarter of this year.

LED industry noted that the LED chip used in car lights only accounts for a very small proportion of the total cost. To calculate with approximately 30-40 pieces of LED chips for one set of tail lamp, the price gap between Philips and Epistar may be less than 200 Yuan NT, internationally renowned car manufacturers will not to riskily change suppliers to save a little money. Therefore, it is even rarer for Epistar to access. Car brake lights are red, turn signals are yellow, and however, regardless of technology, capacity and patents, Epistar is the best around the world.

However, there are still variables for Epistar in Q3; its backlight demand may not be high season. Morgan Stanley estimates that total revenue of Epistar in Q3 will decrease approximately 3% quarterly. The proportion that lighting revenue takes up in the total revenue in the second half will be increased to 40% (30% for the first half), profitability is expected to be improved gradually. It is estimated that the gross margin in Q3 is 18%, about 15% in Q4.

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