31 May 2010


LED chipmaker Epistar expands by taking 48% stake in Huga

Taiwan’s biggest LED chipmaker Epistar Inc plans to form a strategic alliance with its second biggest LED chipmaker Huga Optotech Inc by becoming its largest shareholder, according to Taiwan-based publication Digitimes. For January-April 2010, Epistar’s revenues totaled NT$5.68bn (up 89% on a year ago) while Huga’s were NT$1.41bn (up 21%).

Last Friday, Epistar’s board of directors approved a plan to issue 78 million new shares in exchange for 184.08 million Huga shares (i.e. one Epistar share for 2.36 Huga shares). Also, on 17 May Huga said that it was issuing 100 million new shares at NT$30 per unit to raise additional paid-in capital, and Epistar is now to subscribe to 44.79 million of the shares (a cash payment of up to NT$1.5bn), according to a filing with the Taiwan Stock Exchange. As a result, Epistar will acquire a total 47.88% stake in Huga NT$8.6bn (US$268m). The deal is scheduled to close on 19 July.

WIN Semiconductors Corp of Tao Yuan Shien, Taiwan, which is the world’s largest pure-play gallium arsenide foundry, is also said to be planning to join the strategic cooperation by taking up new shares being issued by Huga, according to Digitimes (WIN’s chairman Dennis Chen already serves as chairman of Huga).

The consolidation is driven by Epistar’s aim to boost capacity and efficiency amid booming demand after the rapid adoption of LED backlighting for LCD TVs (by Samsung and other consumer electronics firms), which has been straining LED chip supply.

While Epistar and Huga will maintain their existing operations, they will share resources including joint procurement and development of products for market segmentation, Epistar’s chairman Biing-jye Lee is reported as saying in a press conference. Lee said that the alliance is designed to boost competitiveness of both firms in the global market, according to another report in the Taiwan Economic News.

In 2006, Epistar acquired rival Taiwanese LED chipmakers United Epitaxy Co Ltd and South Epitaxy Corp. Most recently, to gain access to further capacity, in October 2009 Epistar spent NT$722m to acquire a 19.3% stake in Tekcore Co Ltd, which has 28 metalorganic chemical vapor deposition (MOCVD) reactors according to investment consultancy Primasia, and this April Epistar paid Formosa Plastics Group NT$839.5m to acquire a 40.75% stake in Na Ya Photonics Inc, which has seven MOCVD reactors.

Collectively, Epistar, Nan Ya, Tekcore and Huga (which has 40 reactors) have a capacity of more than 230 reactors. This is expected to rise to 296 by the end of 2010, forming a strategic group that will become a top-two player in the blue LED segment worldwide, Lee reckons. Compared to international competition, Korean LED makers have been expanding capacity rapidly, with Samsung and LG Innotek planning to have a total of 300 MOCVD reactors by the end of 2010, notes Primasia.

See related items:

LED prices likely to rise 5-10%, say Taiwanese chipmakers

Taiwanese LED makers expanding to meet backlighting demand

Epistar and Formosa Epitaxy hit new highs

Taiwan’s Epistar entering mainland China LED manufacturing

Notebook PC firm Inventec buys 4.9% stake in LED maker Huga

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