The percentage of China LED sales is likely to increase to 15-20% of total revenues in 2013 due to cooperation with Sanan Optoelectronics, according to Frank Chien, chairman of Formosa Epitaxy. Chien added that currently, sales in China account for 7% of total revenues. Due to the cooperation with Sanan, Formosa Epitaxy recently obtained orders from China-based LED lighting firms, said Chien.
Sanan's product quality is comparable to that of Taiwan-based makers, but prices are 15% cheaper, which allows Sanan to successful become a supplier for Taiwan-based downstream firms such as Everilght and Harvatek. Formosa Epitaxy's strategic partner, Unity Opto, may also procure LED chips from Sanan in the future.
Chien noted that after obtaining the NT$2.3 billion (US$79 million) from Sanan through private placement, the capital will be used to expand capacity at the firm's plant in Taiwan. In the future, Formosa Epitaxy's main production facility will stay in Taiwan, added Chien.
China currently accounts for 98% of Sanan's total sales, but only accounts for 7% of Formosa Expitaxy's total revenues, hence Chien believes there are no problems with overlapping customer bases. In addition, the two firms have different products and patents, therefore the cooperation is beneficial, Chien said. Furthermore, cooperation between the two firms will increase negotiating power when sourcing materials, which can effectively lower operating costs.
According to Chien, Formosa Epitaxy has been cooperating with Japan-based Mitsui & Co, and in the past two years, Mitsui has played a key role in expanding distribution channels, helping Formosa Epitaxy to become a supplier for international lighting firms. In 2012, Formosa Epitaxy obtained LED packaging certification in Japan. Formosa Epitaxy expects shipments to LED TV and lighting firms in Japan to continue to grow in 2013.
The firm noted that a new lighting product developed in 2012, will enter mass production in first-quarter 2013 and hopes to see revenues from LED lighting exceed 30% of total revenues in 2013. The firm expects market conditions to improve in March at the earliest.
