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Epistar Gross Margins Improves in 2Q16

2016-07-18

Taiwanese LED chip manufacturer Epistar revenue in June 2016 was down 2.3% to NT $2.11 billion (US $65.87 million) compared to a month earlier, due to inventory take during the end of second quarter, according to a MoneyDJ report.

Compared to the same period in 2015, though, the company reported growth of 9.87% YoY, its first development this year. Taiwanese financial institutes projected the company’s gross margin would turnaround, and its losses would improve. The company estimated adjustments in its production capacity would eventually improve its operation efficiency, while rising LED price quotes for certain products would improve the company’s gross margin and reduce losses in third quarter.

Epistar is a large LED EPI-wafer and chip manufacturer with products positioned to meet LED backlight, lighting, LED displays, automotive lighting and other niche lighting application markets. The company’s manufacturing facilities are in Hsinchu, Miaoli, Tainan regions in Taiwan, and its fabs in China are located in Changzhou, Shenzhen and Xiamen. The company’s LED backlight products make up 20% of its production, lighting 30% to 40%, consumer electronic products 20%, displays about 10% to 15%, while notebook and monitor backlight products consist less than 10%.

The company’s main products include package free CSP LEDs, AlInGaN LED, IR LED products and others. AlInGaN LED products and IR LEDs comprise 25% of products, and its LED product range are applied in automotive lighting, such as interior automotive lighting, taillights, industry inspection equipment, commercial smart lighting systems and other related applications.

Oversupply situations in the LED industry resulted in a price plunge of more than 40% in the industry last year, and it is estimated the industry will still suffer from excessive LED supply this year. However, it is expected price falls will slightly ease, and certain LED products price quotes will rebound, this will improve LED manufacturers operations. Mainly, due to product restructure, and the anticipated release of new lighting and backlight products.

Despite incurring losses in first quarter, the company revenue growth is back on track in June 2016, compared to the same period last year. Overall, the company’s gross margin results in second quarter outshone first quarter results, with financial institutes estimating gross margin will return to 5% to 10%. The company estimates its profits from its main businesses will break-even, and gross margin will reach above 10% by third quarter.

Epistar’s revenue for first quarter of 2016 was up 2.4% quarter-on-quarter to NT $6.06 billion, but declined 8.85% annually, and suffered a gross loss ratio of 7.34%, a significant improvement compared to last quarter. However, consecutive gross margin losses for the last three quarters, resulted in a loss of NT $1.44 billion during first quarter of 2016, and continual income loss for four consecutive quarters resulted in loss after tax of NT $1.64 billion.

The company’s accumulated revenue for first half of 2016 dropped 5.98% to NT $12.61 billion, and its revenue from second quarter 2016 was up 8% QoQ, but down 3% YoY to NT $6.55 billion.

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