China-based Sanan Optoelectronics recently announced it was buying up shares of Taiwan-based Formosa Epitaxy. Cooperation between the two firms can achieve benefits such as economies of scale. In 2012, Sanan has a total capacity of 144 MOCVD sets, and in particular, 22 units have been used to produce AlGaInP LED products, while the rest have been used to produce blue LED chips. Sanan plans to add 100 more units of MOCVD equipment and expects full capacity in 2014. After the equipment has been installed, and combining with Formosa Epitaxy's current capacity of 101 units, total capacity will be 345 units.
In 2012, Epistar and related subsidiaries have had the largest capacity, at 334 units, of equipment among Taiwan- and China-based firms, and in particular, 284 units of equipment have been used to produce blue LED chips. Epistar plans to expand capacity to have a total capacity of 414 units of equipment in 2015.
Sanan is China's largest LED chipmaker with total accumulated revenues from the first three quarters of 2012 reaching US$157 million, about 3.4 times more than Formosa Epitaxy's total accumulated revenues during the same period. Sanan maintained its gross margin around 12.2-24.8% in the first three quarters of 2012 while Formosa Epitaxy saw gross margin around negative 3.3-9.2% in the same period.
The cooperation between Sanan and Formosa Epitaxy will benefit both firms in capacity and expanded customer base. Sanan has strong distribution channels in China and has been obtaining government LED street lamp projects and receiving LED lighting subsidies. Formosa Epitaxy can benefit from the cooperation by gaining access to the China market.
