Epistar Readjusts Product Portfolio as Revenue Slides in 1Q16

Leading Taiwanese LED epiwafer manufacturer revenues dropped 12% YoY to NT $1.64 billion (US$ 50.63 million), the lowest revenue reported over the last three years, according to a report from Taiwanese media Money DJ earlier this week.

Market insiders in Taiwan have speculated the cause of the declining revenue over the past few days, with some pointing intense LED chip prices in certain markets might have hurt Epistar’s sales.

Epistar is one of the few Taiwanese LED manufacturers that is a leading global LED EPI-wafer supplier, other companies that top the list include Nichia, Lumileds, Osram, Lextar, San’an Opto and Elec-Tech International (ETI). Korean LED EPI-wafer suppliers have been less active in the market sector. LED package manufacturers are able to find cost competitive and high quality LED dies that can be packaged to meet different application sectors, such as LED backlight, LED lighting, and special LED applications.

If large lighting manufacturers adjust their supply orders, it could affect its upstream LED component supplier’s revenue. Big lighting brands might choose to scale up in-house LED chip manufacturing, or commission a strategic LED EPI-wafer partner to be the prime supplier, forming an exclusively mature ecosystem. Taiwanese LED manufacturers can also collaborate with different companies as an OEM, but for companies that lack their own LED EPI-wafer production line, such as Everlight and MLS (Forest Lighting) they will choose to procure LEDs from other manufacturers, which has in turn significantly contributed to Chinese and Taiwanese LED manufacturers’ revenue. If any of the manufacturers adjust their orders, it would impact LED EPI-wafer manufacturers product prices and revenue.

There has not been a strong rebound in LED backlight market demands, even though client orders are more stable gross margin performance has been lower than other market sectors.

LEDinside has observed in response to changes in the market, Epistar has made certain adjustments to its marketing and sales strategy, placing priority on profitability. By providing better quality products on the market, the company can gradually withdraw from products with low profitability, but this strategy will impact the company’s revenue in the short term. Even though the company’s revenue dipped during first quarter of 2016, it is projected the company’s gross margin or gross loss situation will turn around by March 2016 earliest or by April. To prevent low-priced products from China or India from affecting its revenue, Epistar’s long term strategy will be entering the niche LED market. It already has showcased some results from its GaN power device investments. The company also has a fairly large market share in the LED filament sector, and its future operations strategies will avoid intense price competitions, by differentiating itself from other competitors and focusing on specific clients. 

(Author: Ivan Lin, Editor-in-Chief, TrendForce, Editor: Judy Lin, Chief Editor, LEDinside)

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