UMC develops strong presence in LED business

Taipei, March 1, 2005 (CENS)--Epitech Co., Ltd., a light-emitting diode affiliate of foundry giant United Microelectronics Corp. (UMC), has merged with South Epitaxy Corp., forming Taiwan's second-largest LED manufacturing conglomerate trailing only Epistar Corp.

Executives of both companies have kept a very low profile when they are asked about the reports. UMC has sent one of its executives to replace the one assigned by the Tainan Textile Group as corporate investor representative at South Epitaxy, which was mostly owned by the textile group.

Taiwan's industry watchers pointed out that the combination suggests UMC is enhancing deployment in the opto-electronics industry after investing in liquid-crystal display (LCD) IC business Novatek Microelectronics Co., Ltd. And LED packaging supplier Harvatek Corp.

They added that UMC had intensively developed its opto-electronics business and acquired South Epitaxy considering the bright future for LED in lighting and LCD backlight industries. LED has been viewed as a darling industry over the next three to five years.

South Epitaxy is now the largest supplier of blue-light LEDs in Taiwan, earning an estimated NT$306 million (US$9.8 million at US$1:NT$31), or NT$2.14 per share, last year. Its diodes have gone into handsets, outdoor billboards, neo lights, sunken lamps and decoration lamps. The company went public in Taiwan late last year.

Epitech earned about NT$5 per share or so and reported gross margin of 51.3% last year, making it the most profitable LED supplier in Taiwan.

After the combination, South Epitaxy is the surviving company as it is already a listed firm. The combination is expected to boost South Epitaxy's monthly output to over 300 million blue-light diodes and make the firm the second-largest LED supplier in Taiwan, with a combined annual revenue of NT$2.4 billion (US$77 million) in 2004. Epistar reported revenue of NT$2.9 billion (US$93.5 million) for last year.

Industry insiders on the island analyzed the combination would incur a new combination wave in Taiwan's LED industry, convincing at least 13 of local LED diode suppliers to combine in order to hone competitive edges. They pointed out that although Taiwan has already dominated over 40% of the world market for blue-light diodes, Taiwanese suppliers have been working hard to maintain profitability as a result of undercutting competition.

They pointed out Taiwan's LED industry has grown into an area in which the UMC-lead alliance rivaling the alliance dominated by Epistar after the Epitech-South Epitaxy combination.