Recently, Formosa Epitaxy announced the inauguration of its LED chip subsidiary based in Yangzhou, China, which could become China's largest epitaxial wafer maker in 2012 when it completed the installation of 50 MOCVD machines.

Formosa Epitaxy chairman noted, the company expected LED chip demand return to the levels of the first half of 2010 in February and March of 2011, and mass shipments for applications in tablet PCs would begin in February as well.

Formosa pointed out, with Samsung Electronics and LG Electronics beginning sourcing from LED chipmakers in Taiwan, LED chip would bring lots of gross margin. Meanwhile, in the LED TV market, its penetration would increase substantially in 2011 due to falling prices and gross margin for the sector to make a new record. And affected from new applications, gross margin would still maintain at 30-35% in 2011

In 4Q10, Formosa Epitaxy would ship about 10-20 million LEDs, about 2-3% of the company's quarterly revenues but ASP is 6-7 times higher than conventional chips.

Market source analyzed, Formosa Epitaxy's Taiwan facilities were equipped with 56 MOCVD machines, capable of producing 120,000 epitaxial wafers a month. By the end of 2011, monthly capacity should rise to 150,000-200,000 wafers. If adding China market, the MOCVD equipment would combine for 126 units in 2011.

Market source estimated Formosa Epitaxy would get NT$4.5 billion (US$150.56 million) in revenues for 2010, up 120% from 2009, and growth of 50% is projected for 2011, in which the sales of TV backlight, lighting and tablet PC applications would have a 60%, 15% and 15% share respectively.