Chairman of FOREPI, Mr. Feng-Ren Chien, Expects Canyang Optoelectronics Co. to Become the Biggest LED Epi Wafer Plant in China

The chairman of FOREPI, Mr. Feng-Ren Chien, indicated at an interview with LEDinside in Yangzhou that the MOCVD equipment owned by Jiangsu Canyang Optoelectronics Co. has reached 25 units by the end of 2010. While many LED Epi Wafer plants in China claimed their capacity goals without specific clients, Canyang Optoelectronics has ensured that there is a healthy outlet for their production capacity through successful vertical integration model. Hence, Chien is confident that by the end of 2011, the company will expand its capacity to 50 units, poised to become the largest foreign-invested LED Epi Wafer manufacturer in China.

Vertical Integration Model to Create Healthy Outlet

Different from horizontal integration model of Epistar, Chien expected to optimize the company’s existing resource. Therefore, he cooperated with upstream suppliers and downstream clients, hoping to create a close bond with end customers to ensure a healthy outlet for its production. Currently, the capital of Canyang Opto reaches USD 90 million, and its equity holders include FOREPI, LGD, VIZIO, Unity Opto and Wooree.  

Although FOREPI’s vertical integration model is complete in the large backlight market, its scale of end clients in the lighting area is not robust. Therefore, FOREPI is still seeking strategic partners in this field. 

Equity Structure of Canyang Optoelectronics Co.

Backlight in the TV Market to Become Main Growth Momentum in 2011

As the penetration rate of LED backlight in TV will continue to rise in 2011, Korean panel maker LGD has covered half of the capacity of Jiangsu Canyang Optoelectronics Co. to make sure its LED penetration rate in 2011 reaches 60%. In addition to existing Korean clients, such as Samsung and LG, FOREPI has started to supply for major TV vendors in China and has entered into the supply chains of Changhong, TCL, Hisense, amongst others.

As for capacity planning for large backlight application, Chien noted that Jiangsu Canyang Optoelectronics will fully support LGD, while Taiwan-based FOREPI ill support others.

As Tablet PCs Demand Boomed, FOREPI Faced Tight Supply in its Capacity Since February 

Chien stated that Samsung LG and CPT, who are non-Apple suppliers, adopted non-Japanese LED chips in Tablet PCs backlight application and started a few shipments. Higher volume of shipment is expected in February and March next year. Additionally, backlight product sales in Tablet PCs are expected to account for 15% of total sales revenue in 2011.

Because of strict requirement of LED backlight in Tablet PCs, such as low operation voltage and 2400 mcd- 2700 mcd luminous intensity, very few manufacturers can conform with the strict requirements.

Business Outlook in 2011

While LED industry will likely benefit from LED backlight in TV and lighting application in 2011, several LED manufacturers will show booming growth in 2011. However, the pressure from price reduction still remains and it is the inevitable issue for the LED industry.

Chien believes that the sales revenue of FOREPI in 2011 will increase by 50% since FOREPI is involved in TV backlighting and in Tablet PCs application. With continued MOCVD equipment installation and mass production starting from the first quarter of 2011, Jiangsu Canyang Optoelectronics will achieve RMB 400 million in revenues. Furthermore, sales target in 2012 is estimated to reach RMB 1 billion.

As for profitability, the pressure comes from LED price reduction every year, and it will certainly affect its performance. However, recently, the price decline of raw materials, such as sapphire substrate, benefited its cost reduction. For example, the price of 2”sapphire substrate declined from USD 30-35 in 3Q10 to USD 25-30 in 4Q10. Therefore, it is forecasted that gross margin will reach 30%-35% in 2011. 

More Information:

Jiangsu Canyang Optoelectronics Co. Officially Starts Production and On-site Facility; Expected to Produce 50 Sets of Equipment

MOCVD Subsidy Policy Implemented by Yangzhou Municipal Government to End in July 2011