Apple Turns to Taiwanese LED Suppliers for Smartwatch and iPhone Backlight

Taiwanese LED epiwafer manufacturers received backlight orders from Apple for iPhone products and the upcoming Apple Watch, according to a latest report by Chinese-language Liberty Times report.

Epistar declined to comment, and was quoted by the report to have said “no comments.” While Genesis Photonics Inc. (GPI) responded it is focusing on flip chip developments, and will be making significant technology breakthroughs in 2015.

Apple has mostly been using Japanese manufacturers Nichia and Toyoda Gosei’s LEDs in its handheld devices, such as the iPhone and iPad. The two Japanese manufacturers have topped Apple’s supplier lists in the last two years, but recent market rumors have suggested Taiwanese LED manufacturers have finally joined the Apple suppliers club indirectly through Toyoda Gosei. The Taiwanese LED chip manufacturer will not be found in Apple’s 2014 supplier list, but through a patent cross-licensing agreement signed with Toyoda Gosei in 2010, followed by the establishment of TE Opto Corporation through a joint venture with the Japanese manufacturer, Epistar has become one of the biggest global LED epiwafer manufacturer. Thus, many in the industry speculated Epistar supplies Toyoda Gosei with LED chips that are packaged and delivered to Apple.

Taiwanese manufacturer rumored to have replaced Korean companies as Apple Watch suppliers

Most industry insiders projected the Apple Watch to hit the market in 2015 will be adopting LG Display’s (LGD) OLED, but another market rumor claims orders have gone to Taiwanese LED manufacturers instead. Epistar Spokesperson Rider Chang gave “no comments,” to both iPhone and Apple Watch backlight inquiries. From sapphire supplier GT Advance Technology (GTAT) bankruptcy documents, it can be seen manufacturers that violate Apple’s confidentiality agreements can be fined a maximum of US $50 million.

Epistar’s gross margin reached 21% during second quarter in 2014, and third quarter performances are very close, said Chang. One of the main reasons has been Epistar reached full utilization rates in July and August, and has lowered unit costs. At the same time the industry supply and demand reached an equilibrium, and revenues have been supported by the company products ASP. Epistar’s operating income reached US $1 billion during second quarter, three times higher than first quarter. The company’s recognized non operating loss reached NT $800 million (US $26.32 million). The company is estimated to turn around losses in third quarter, and improve profitability. Epistar projected fourth quarter will be a traditional cool season, with a relatively low possibility of reaching full utilization rates.

GPI to continue profiting streak in 3Q

Sliding third quarter revenues were the result of seasonal adjustments, and not the result of negative industry impact, which can be observed from product ASP and gross margin, said GPI. “Unlike two years ago, when the LED industry was at its worse, and revenues and gross margin both declined,” said GPI. The company projects gross margin in third quarter will be close to second quarter and remain profitable. GPI’s flip chip products are expected to be shipped in large volumes next year for outdoor lighting and large size TV backlight applications.

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