Cooperation to Be the Trend for Taiwan’s LED Industry

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Popularity of LED TVs has driven up the demand for LED backlighting, leading to the wave of integration in Taiwan’s LED industry. And the island’s largest LED chipmaker Epistar recently said it is to purchase shares of Tekcore Co through a private placement deal. This trend of vertical and horizontal integrations seen in the industry can help keep the companies’ gross profit rate up, boost their capacities, as well as guarantee the supply to the customers, analyzed the industry research firm LEDinside.

Epistar said it will invest NT$722.4 million (US$22.45 million) to acquire a 19.9 percent stake in Tekcore. Unlike vertical joint-hands between upstream and downstream manufacturers which are aimed to sharing resources and ensuring supply to downstream companies, this horizontal corporation between the two upstream chipmakers is the first of its kind in the industry, and is likely to be followed by other companies in the future, according to LEDinside,.

Epistar said that its investment in Tekcore is aimed to sharing resources together while lowering potential risks for capacity expansion in a bid to enhance profitability and boost shareholders’ interests. According to LEDinside’s analyze, the industry has seen several fund-raising cases since 2009, mostly of which with the purpose of expanding capacity. However, the vast capacity expansion of downstream manufacturers has increased the risk in upstream supply, leading to their vertical integration with upstream manufacturers to guarantee the supply.

Currently, the LED-based company alliances include: Epistar and Tekcore; Huga Opto and Semiconductors; FOREPI and TATUNG GROUP; Opto Tech, AOT and InnoLux; LG, AmTRAN and Everlight; AUO, Lextar and LightHouse; CHI MEI and CMLT. The above are all cooperation between upstream and downstream LED manufacturers (including LED application companies).

LEDinside points out that the cooperation between Epistar and Tekcore is favorable for both sides; on one hand, the gross profit rate of Epistar is expected to be boosted; on the other hand, Tekcore will receive more orders, could ramp up the capacity utilization rate and have its technology improved.