13 January 2012

SemiLEDs revenue rebounds by 27%, driven by lower-price indoor components

For its fiscal first-quarter 2012 (to end-November 2011), LED chip and component maker SemiLEDs Corp of Boise, ID, USA (which has chip fabrication facilities in Hsinchu Science Park, Taiwan) has reported revenue of $6.75m, down 48% on $13m a year ago but rebounding 27% from $5.3m last quarter (which has been down 5% on the prior quarter). This is also at the high end of the $6-7m guidance given in November).




Founded in 2005, SemiLEDs’ manufactures proprietary blue, green and ultraviolet (UV) LED chips under the MvpLED (metal vertical photon LED) brand for sale mainly to chip-packaging customers in China, Taiwan and other parts of Asia such as Korea, or to distributors who sell to packagers. It also packages chips into LED components for sale to distributors and end-customers in selected markets (mainly for general lighting applications, including street lights and commercial, industrial and residential lighting).

Sequential growth is due to 93% growth in LED component sales (to about 45% of total revenue) – largely as a result of developing new, lower-price indoor lighting products - SemiLEDs continues to diversify its product revenues and provide more complete product solutions. In contrast, revenue from LED chip sales fell 29% (to 30% of total revenue). Other revenue (mainly luminaires, manufacturing of which is outsourced) has risen to 25% of total revenue.

“Our strategy of pursuing the indoor lighting market has already proven fruitful, as demonstrated by our financial results,” says chairman & CEO Trung Doan.

Compared with +51% a year ago, gross margin was negative 12%, although this is an improvement from negative 93% last quarter. Operating margin was negative 95%, compared with 38% a year ago. However, margins have improved slightly from last quarter due to managing expenses. R&D expenditure was cut sequentially by $0.6m to $1.7m. SG&A expenditure was cut by $0.9m to $3.9m (although last quarter included a charge of $1.1m for bad debt reserve).

On a non-GAAP basis (excluding stock-based compensation expense of $0.7m, net of tax), net loss was $7.1m ($0.26 per diluted share), the firm’s fourth consecutive quarter of losses, although cut from $13.6m last quarter. This compares with net income of $3.9m ($0.12 per diluted share) a year ago.

Cash used in operations was $3.5m plus capital expenditure of $5.8m yielded free cash flow of negative $9.3m. Cash and cash equivalents hence fell during the quarter from $83.6m to $74m (a drop of $9.8m, slowing slightly from the decline of $10.8m last quarter).

“The industry remains very challenging,” says Doan. “We believe the steps we are taking will allow us to weather the storm and position us well for when the industry recovers,” he adds. 

“In early November, I said that the market remained challenging in Asia for LED chips and components,” continues Doan. “The China market is still the same, and economic conditions around the world are full of uncertainty. However, pockets of demand have emerged.” For example, on 15 December, Taiwan announced a street-light project valued at about NT2bn (US$66m) which will be used to help local government install 250,000 LED street lamps in place of existing mercury vapor lamps.

Although the firm is still using some 2-inch wafers for R&D and certain legacy products, SemiLEDs’ production lines in Taiwan are now qualified to produce chips on 4-inch wafers. In addition, the China SemiLEDs joint venture (formed in January 2010 in Foshan, Guangdong Province) is running entirely at 4-inch. In fiscal second-quarter 2012 (ending 29 February), SemiLEDs is scheduled to start selling products on the China market that will incorporate chips manufactured by China SemiLEDs and be packaged locally.

For fiscal second-quarter 2012, SemiLEDs expects revenue to grow to $7-8m. However, gross margin is expected to still be negative, as production capacity will still not be fully utilized. CapEx should be just $1.5m.

China’s 12th five-year plan includes a commitment to drive energy efficiency and LED lighting adoption, and SemiLEDs claims to be one of the few companies that meets the program’s requirements. “However, we have not seen this plan released yet,” notes Doan. “Therefore, we are still producing a limited production and are continuing to focus on yield and reducing cost to ensure we are well positioned when the market improves.”

See related items:

SemiLEDs’ revenue falls a further 5% due to delayed China lighting demand

SemiLEDs’ quarterly revenue drops a further 43%

SemiLEDs revenue drops due to pricing pressure

SemiLEDs’ revenue almost doubles year-on-year

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