Taiwan-based tier-two LED chipmaker Tyntek has confirmed that its upstream blue epitaxial wafer firm Alpha Plus Epi has suspended production. Rumors regarding the production suspension of Alpha Plus Epi have been circulating in the market and LED chipmaker Epistar may procure the equipment from the firm. According to Tyntek, the subsidiary has halted production and will lay off one-third of staff in the first phase. Tyntek added that due to weak market conditions, discussions with buyers are still on-going.
Tyntek set up Alpha Plus Epi in 2010 and the subsidiary began operations at the end of 2010. Tyntek invested around NT$1 billion (US$33.6 million). However, due to high entry barriers in blue epitaxial wafer process technology, and price competition from China-based peers that caused high inventory levels for Alpha Plus Epi, the firm recognized a net loss from the investment of NT$700 million in 2012.
Industry sources noted that Alpha Plus Epi has nine sets of MOCVD equipment and Tyntek has been discussing with buyers from Taiwan and China to sell. Epistar is likely to procure the equipment but is unlikely to acquire the firm while China-based buyers can only procure 50% of Alpha Plus Epi shares due to regulations.
Despite optimism in the LED market as demand has been rebounding in the first quarter, due to price competition and the lack of advanced technology, tier-two LED firms have not been benefiting significantly.
According to market research institutes, total February revenues of Taiwan-based upstream LED chipmakers that are public were NT$2.73 billion, down 15.5% on month and 0.7% on year, but tier-one firms such as Epistar and Genesis Photonics both saw February revenues show on-year growth of around 5-6%. Total February revenues at Taiwan-based downstream packaging houses were NT$4.22 billion, showing an on-month decrease of 16.8% but an on-year increase of 6.5%, according to market data.
