LED chipmakers including Epistar, Formosa Epitaxy and Tekcore expect revenues in September to continue to drop amid dropping demand for TV backlighting, and gross margins for the third quarter of 2010 are expected to drop 4-5 percentage points due to increases in component prices, as well as shortages of such components as sapphire substrates and special gases.
Epistar indicated that the company had a difficult challenge in terms of September revenues amid weakening demand for TV backlighting and general lighting, but the company expects revenues to start picking up in October as capacity adjustments for different applications have been completed and production is getting back on track. Epistar believes that although shipments for new LED-backlit TV models have started, shipment performance still needs to be closely monitored. November will be a key month. If sales during the National Day holiday in October in China are good, it will help boost demand in Europe and US in the year-end holiday sales, Epistar said. Market observers expect that Epistar's September revenues may drop 10% sequentially to below NT$1.9 billion (US$61.31 million), while revenues for the third quarter of 2010 are expected to increase by 5-10% sequentially to NT$5.6 billion.
Tekcore also believes that its September revenues will drop, while market observers expect the company's revenues to drop by 10-20% sequentially to about NT$200-220 million in September and revenues for the third quarter to increase by 10-12% sequentially to NT$700 million. Furthermore, component supply in the fourth quarter is expected to improve, helping to boost shipments.
Formosa Epitaxy expects its September revenues to continue to drop mainly due to low TV backlighting demand and tight component supply. Although TV backlighting demand may increase due to vendors' launch of new models in the fourth quarter, the small- to medium-size segment will enter the low season. Market observers noted that Formosa's revenues in September will drop over 10% sequentially, while revenues for the third quarter will increase by 10% to NT$1.5 billion.
With LED chipmakers expecting revenues to decrease in September amid a 50-60% growth in component prices in the third quarter, gross margins for the third quarter are expected to drop, market observers noted. Prices for sapphire substrates were about US$10-13 in the first quarter of 2010, started to increase in the second quarter and reached US$20-30 in the third quarter, the observers said, adding that the increases in component prices are expected to result in a 4-5 percentage points drop in the LED chipmakers' third-quarter margins and the makers will need to maintain their profits by controlling cost and changing product mixes.
Article translated by Yvonne Yu
