IT Heavyweights in Taiwan Invest in Bright Future of LED Lighting

One investor driven by China's pl

The LED making sector in Taiwan has recently been given a heavyweight confirmation, with leading chip foundry TSMC having broken ground on March 25 to set up its first LED-manufacturing complex composed of a factory and LED-lighting R&D center. TSMC's CEO and chairman Morris Chang countered often reported news, saying he would never invest in a low-margin business flooded with excessive newcomers as is the case with LED, solar and his own silicon foundry.

The 78-year-old Chang has been lionized as the “Father of Silicon Foundry Industry” in Taiwan for founding TSMC in 1987 as the world's first pure silicon foundry provider, which he has developed into a global leader whose technologies are shared with Intel and Samsung.

Very confident of the future of the company's LED and solar-energy business, Chang says the two operations will be major moneymakers in five to 10 years.

Chang's optimism is also raised by how TSMC's LED operations will be run. According to Rick Tsai, head of TSMC's New Business Development Organization, the LED and solar-energy businesses will not likely follow TSMC's traditional contract-manufacturing model, instead will build private brands. Tsai, formerly TSMC's CEO, was given the mission to diversify, PC-speak for finding more profitable businesses, outside silicon foundry last June.

Industry executives believe building brand name products usually command higher profit in dollar terms than contract manufacturing in spite of higher risk.

Further qualifying TSMC in its new venture, Tsai says the firm is adept at both LED and silicon-chip productions, which are closely related.

LED Lighting Module Focused

The new complex, to be outfitted with eight to 12 metal organic chemical vapor deposition (MOCVD) chambers initially, will focus on building LED light modules that can be assembled into lighting fixtures with minor calibrations. Pilot production will start once the US$171 million initial-phase construction will have been finished in the first quarter of 2011. LED-manufacturing equipment suppliers estimate this investment project to cost TSMC around US$200 million.

TSMC's chip assembly subsidiaries Xintec Inc. and VisEra Technologies Co., Ltd. have also begun developing packaging and testing capabilities for LED products, aiming to set up integrated production for its LED business.

Clearly following Chang's grand vision, TSMC is also recruiting R&D specialists, as many as 5,400, to prioritize R&D over LED manufacture.

Not a newcomer to LED business, TSMC invested in American LED chipmaker BridgeLux through its venture capital fund VentureTech Alliance, as well as having set up a patent bank and launched pilot production of epitaxy wafers using obsolete MOCVD chambers.

UMC Makes No. 2

United Microelectronics Corp. (UMC), another heavyweight in Taiwan, has also opened a new business center and subsidiary “UMC New Business Investment Corp.,” taking after the TSMC counterpart.

Not as grandiose and ambitious as TSMC's start-from-scratch method, UMC's investment company aims to evaluate and acquire controlling stakes in established manufacturers, and then run them hands-on.

Wen-yang Chen, a UMC senior vice president, will oversee the center and is currently heading operations and sales at UMC's 8-inch and 6-inch fabs.

Seemingly echoing Tasi at TSMC, Chen says UMC's knowledge and technologies are fully compatible with the fundamentals of these two industries, on which the new business center will tap UMC's existing expertise.

UMC expects the new venture to generate growth and better bottom-lines.

Insiders say UMC has put aside 20% of capacity at its 6-inch factory for the development of LED epi wafers and invested in epi-wafer, LED packaging, LED power supply and LED lighting fixture assembly lines in Shandong Province, China to turn out LED streetlights for Jining City.

Most of UMC's LED investment projects are in the Jining New & Hi-Tech Industrial Park in Shangdong province, with nine LED specialist businesses having been held at an investment of US$300 million.

Driven clearly by the bottom-line, UMC is investing in China for the governments there are building infrastructure by installing LED streetlights and solar panels. Brighter future lies ahead: LEDiside of Taiwan, which tracks LED market, predicts China's demand for LED streetlights to soar 60% to over 400,000 systems this year, from 2009's 250,000 systems, with the global market estimated to rise 46.62% to 870,000 lights, from 610,000 lights.

Industry watchers estimate UMC's nine affiliates in the park to generate revenues exceeding US$312 million upon volume production in the third quarter this year.

Hon Hai Precision is No Exception

Hon Hai Precision Industry Co., Ltd., the world's biggest provider of electronic-manufacturing service, is known for its hawkish M&A approach, by which it quickly diversifies. Also stepping into the LED sector, Hon Hai has bought into Alpha Crystal Technology Corp. to access sapphire crystal-ingot manufacturing, Advanced Opto-Electronics Technology Inc. for LED packaging, and Foxsemicon Integrated Technology Inc. for LED lighting products and backlights. Foxsemicon has started shipping LED streetlights to China.

Jinan Science and Technology Bureau and Jinan Daily of Jinan City of Shandong Province said Foxconn International Holdings Ltd., in which Hon Hai Precision Industry Co., Ltd. holds a controlling stake, had signed an agreement with the provincial government to open a US$500 million factory in the city to produce LED lighting, packages and outdoor signage.

Municipal officials say that Foxconn, after signing the agreement, had sent executives to study the factory site inside the high-tech park, without saying when Foxconn will begin construction and production. The officials also say that Foxconn had won LED-lighting engineering contract from Jinghu Railway, which runs between Beijing and Shanghai.

After acquiring LCD maker Chi Mei Corp., Hon Hai has reportedly consolidated its LED affiliates not for lighting purpose, but due to rising substitution of LEDs for cold cathode fluorescent lamps as backlights in many LCD applications including TVs and laptops.

Insiders say Hon Hai's LED consolidation plan would likely involve Advanced Optronic and Chi Mei Group's Chi Mei Lighting Technology Corp., adding that Hon Hai was considering to partner with LED chipmaker Epistar Corp. and buy into Japanese chipmaker Toyoda Gosei Co., Ltd.

Industry watchers expect Hon Hai may even incorporate Formosa Epixy Inc. and Unity Opto Technology Co., Ltd., both partly held by Chi Mei, into its LED operations.

Delta Electronics Also Onboard

Delta Electronics Inc., the world's top manufacturer of power supplies, is also getting onboard the LED train, setting up LED-manufacturing by allying with manufacturers upstream, mid-stream and downstream. Its upstream partners include chipmaker Epistar, packagers Helio and Lustrous, and drive IC designer Macroblock; mid-stream teammates include thermal-module maker Neng Tyi and thermal-substrate supplier Tong Hsing; with downstream supplier being Edison, the specialist in LED lighting modules.

Delta has launched at least 14 LED luminaires, a record in Taiwan, and has announced landing orders from the U.S. and Europe, lighting products of which will begin to be delivered late this quarter or early next quarter.

Obviously optimistic about the future of LED streetlights, Delta is trying to expand global presence by instructing all 27 overseas sales outlets in China, Japan and Europe to tap the market for more orders. Similar to Foxconn, Delta is vying for LED streetlight contracts in China, apparently reversing its former refusal to bid for official contracts.

Closing its CCFL plant late last year to focus its resources on LED production, Delta installed LED streetlights on a thoroughfare as demonstration in Taoyuan County of northern Taiwan in collaboration with the county government.

Besides expanding its LED lighting line with indoor lights, light tubes, light bulbs and solar-powered lighting systems, Delta has also shipped streetlights to northern and central Europe, China and the USA.

Starting at the Top

Qisda Corp., a consumer-electronics subsidiary of the BenQ Group, has started its LED-lighting business at the top-end, branching out into the segment in 2008, perhaps backed by a confidence boost from having won the renowned Red Dot Award of Germany. Company president and CEO Hsiung Huei says his company began shipping LED lamps in the third quarter of 2009 to upscale restaurants and hotels, aiming to fatten bottom-lines.

Hsiung claims to have in-house design capability, which the maker taps to build innovative products on the OEM basis for European, American and Japanese brand-name suppliers of upmarket lighting products.

The CEO boasts of having several advantages in LED-lighting manufacturing over rivals, not least of which being owning LED chipmaker Lextar Electronics Corp.