Benefit from the government's recent announcement that it will hike electricity rates, Taiwan several major LED lighting firms, such as Everlight, Edison and Unity Opto, have received large orders from corporate customers who want to cut operating costs through wider use of energy-efficient lighting.

Therefore, the increase in orders in LED lighting have even boosted demand for LED chips and will lead to full capacity utilization at upstream suppliers in the LED chain in the second quarter.

According to Mirae Asset Management analyst Arch Shih, “We estimate that the latest wave of incoming orders are likely to boost sales of these LED firms by about 30 percent in the second quarter.” Shih still had doubts, however, about whether these LED vendors will be able to translate rising sales into satisfactory profits.

“Look at the worse-than-expected results posted by Cree. I remain cautious about the profitability of the LED sector due to high production costs,” Shih said. “Unless they can cut costs, their bottom lines are still squeezed. Investors still need to be careful when trading LED stocks. I'm afraid that once they fail to deliver satisfactory results, their shares will encounter pressure.”