Taiwan-based LED maker Epistar announced a merger with Formosa Epitaxy (Forepi) on June 30, 2014, with the former aiming to fully acquire the latter and become the surviving company. Epistar explained that the merger is meant to improve its strengths in competition for first-tier international lighting companies' LED orders.
Epistar said demand from first-tier international lighting vendors has been strong, resulting in a 30% shortage in the high-end LED segment.
Epistar's merger with Forepi will immediately resolve Epistar's capacity shortage problem and greatly improve Forepi's product mix and utilization rates. Prior to the merger, Forepi's LED epitaxial wafer production value per unit was 30.7% lower than that of Epistar, which shows that Forepi was receiving orders at prices lower than the market average.
With Forepi starting to fulfill orders coming from Epistar in July, Forepi is expected to see improvements in profitability. With technological assistance from Epistar, Forepi's production capacity from its existing equipment can go up by 20-30% to reach a monthly output of over 400,000 units.
The merger will also create the largest supplier in Taiwan and in the world. Digitimes Research's figures show that Epistar and Forepi's combined capacity accounted for 65.6% of Taiwan's blue LED segment in the second quarter of 2014.
By the end of 2014, the number of Epistar and Forepi's InGaAlP and blue LED manufacturing equipment will reach 500 sets, double those of San'an Optoelectronics and accounting for 22.6% of global LED chip capacity.
In addition, the merger is expected to have further influence on the LED industry in the future. Since Epistar and Forepi are pushing the strategy of "run as one company," their decision is expected to help stabilize the industry and minimize price competitions.
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