Rising demand for LED backlight and lighting products helped LED chipmakers see capacity utilization rates increase to 90% in the second quarter. Despite shortages of high-end products, the overall LED industry continues to be in oversupply. Market rumors regarding possible changes to the LED epitaxial wafer joint venture between Taiwan-based LED chipmaker Epistar and power-supply firm Delta Electronics in Guangzhou, China, have been circulating. Both firms said they do not comment on rumors.
Epistar currently has three epitaxial wafer investment projects in China, located in Changzhou, Xiamen and Guangzhou. According to industry sources, compared to the plants in Changzhou and Xiamen, which have begun production, the Guangzhou plant has been slow to progress. Market rumors noted that Epistar and Delta have doubts due to the continuous oversupply condition and may consider terminating the project.
Epistar and Delta announced in first-quarter 2011 plans to construct a joint venture in Guangzhou with an initial investment of around US$120 million. Epistar plans to invest around US$70 million to own a 70% stake. At the time of the announcement, the LED industry was about to take off and there were shortages of LED chips. In addition, China local governments provided subsidies for MOCVD equipment procurement. However, due to over-expansion in China, the LED chip market has been in oversupply. Market observers stated that as subsidy programs in China have come to an end, many China-based LED firms have been seeing falling profits. In addition, market observers believe that supplies will continue to exceed demand by 20-30% in 2013.
Shie-Shien Chang, spokesperson of Epistar, noted that despite the fact that demand in the LED market is likely to stay strong in first-half 2013, the overall market will still be affected by swings. As for the Guangzhou project, no final decisions have been made so far, said Chang.
Epistar is optimistic about demand growth of the LED market in China in 2013. The joint venture of Epistar and China-based China Electric Corporation (CEC) in Xiamen has begun production. The plant currently has 11 MOCVD equipment sets and plans to add eight more in 2013.
Construction of Epistar's joint venture with Lite-On Technology in Changzhou was completed at the end of September 2011. By the end of 2011, the plant had 11 MOCVD equipment sets. In 2013, the plant will add seven more sets.
Epistar stated that demand for LED lighting has been strong and some orders have been scheduled for the third quarter. Order visibility for LED backlighting products is clear to June, said the firm.
