Out in Front

Digitimes Research: TSMC SSL merger to enhance Epistar in the LED market

Jessie Lin, DIGITIMES Research, Taipei 0

Epistar has invested NT$825 million (US$25.94 million) to merge with TSMC Solid State Lighting (SSL), helping to enhance Epistar's capability in the lighting industry. Before the decision was made, many companies such as SemiLEDs and Advanced Optoelectronic Technology (AOT) had also been talking to TSMC SSL about merger.

Digitimes Research believes the merger should benefit Epistar in strengthening its silicon substrate LED technologies to improve its competitiveness in the global market in the future.

TSMC SSL only has five production machine sets, a limited contribution to Epistar's overall capacity, but TSMC SSL's manufacturing process technology will become a complement for Epistar, which mainly manufactures LED chips via sapphire substrates, since these machines are able to conduct middle-level packaging with technologies that cover upstream epitaxial manufacturing process for silicon substrate LEDs as well as supporting midstream's Phosphor on Die (PoD) and Epoxy Molding Compound (EMS) technologies.

With Japan's Toshiba Semiconductor having significantly raised its silicon substrate LED capacity and Korea-based Samsung and LG aggressively developing 8-inch silicon substrate LED products using their existing advantages in semiconductor technologies to save costs, Epistar's merger with TSMC SSL is expected to greatly strengthen its silicon substrate LED technologies.

Digitimes Research believes silicon substrate LED chips currently still have many issues such as weak yield rates and poor lattice constants and therefore the industry will still focus mainly on supplying sapphire substrate LED chips over the next several years. However, Epistar - as the leader of the global LED industry - will still need to have a diversified development of technologies, allowing it to defend against competition from competitors' silicon substrate technology and patents in the future.

Before the merger, TSMC SSL had a talk to the Foxconn Group's subsidiary AOT about merger during the second half of 2014, but their talks ended with no result.

Digitimes Research believes the failure was because AOT only has a capital of around NT$1.45 billion (TSMC SSL's net value was around NT$2 billion) and its business focus on mass production of LED packaging devices, which instead of merging TSMC SSL, the company should be able to achieve lower LED die costs by purchasing from outside suppliers as there is a sufficient global supply. Since the investment will only create limited value to AOT, the two's merger was not realized.

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