Epistar Rumored to Raise Number of Layoffs

Leading LED chip manufacturer Epistar’s has raised the number of job cuts from the previously announced 65 to about 180, reported UDN.

Job cuts at the company’s factories in northern Taiwan’s Hsinchu Science Park will occur in three phases and affect 76 employees. The latest layoffs will include mid to senior level managers, such as assistant managers and deputy directors. The company subsidiary FOREPI will also be slashing 39 jobs.

A ring of colored LEDs. (Photo courtesy of Epistar)

The total number of employees laid off as part of the company’s restructure process to flatten its company organization tallied to 3% of its workforce.

Chinese technology companies ascension led to the emergence of the “red supply chain,” which has directly impacted the Taiwanese technology industry, reported TechNews. The Taiwanese LED industry is a victim of these developments, and suffered recession for the past few years. Unlike heavily subsidized Chinese counterparts that also have funding advantages and financial aid, Taiwanese companies are lowering costs through layoffs and unpaid leave to reduce expenditures. Potentially, Taiwanese manufacturers face continual revenue decline.

The Chinese government has been a strong supporter of the LED industry, and spurred the local LED chip industry’s large expansions. Many manufacturers acquired new MOCVD equipment, and these equipment have entered production phase, leading to oversupply of LED chips. This is placing huger pricing pressure on LED chip suppliers. LED chip industry’s oversupply situation is about 22% in 2015, and has impacted the LED chip industry developments, according to LEDinside’s latest analysis.

Epistar's monthly performance for 2015 indicates a downtrend that has also been observed for 2014. (Source: Epistar. Data organized by TechNews and LEDinside)

Taiwanese LED manufacturers are finding themselves sandwiched between Chinese supply chain’s low prices, leading international lighting manufacturers low pricing strategies, which have increased the pricing pressure on these manufacturers. Adding onto Taiwanese companies challenging circumstances have been easing LED backlight demands that has led to underperforming and sliding revenues during second quarter of 2015. Epistar for instance incurred financial losses last quarter compared to the same period during second quarter of 2014. Moreover, the merge with FOREPI has failed to take effect.

Epistar’s revenue in 2015 has shown the same declining trend as 2014 based on statistics compiled as of August.

Epistar's monthly revenue performance in 2014. (Source: Epistar. Data organized by TechNews and LEDinside)

Responding to market rumors the company will be laying off employees through three phases, the company’s spokesman and Vice President Rider Chang denied the rumors during an interview on Thursday.

The company reviews employee performances regularly, and will adjust accordingly after evaluating their suitability for the job. “These are normal company procedures,” said Chang. After multiple mergers and acquisitions, Epistar is reviewing and adjusting its work force. “These are all positive human resource adjustments,” he added. “The company is still hiring R&D staff for its new businesses, and the situation is not as grave as market rumors.”

As for the company’s revenue outlook for the third quarter, Chang admitted LED backlight orders were not faring so well, but LED lighting demands have rebounded. As for Epistar’s revenue outlook for fourth quarter, Chang noted it would be difficult to explain at the moment.

It is still hard to say, whether the Taiwanese LED industry can find a solution in this dire situation. One LED manufacturer has reported it will be implementing unpaid leave, according to data released by the Southern Taiwan Science Park on Sept. 17, 2015. About 216 employees will be placed on unpaid leave for two days per month, further observations is required to determine whether the number of unpaid employees will expand.

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