6 April 2011

SemiLEDs revenue drops due to pricing pressure

For its fiscal second-quarter 2011 (to end February), LED chip and component maker SemiLEDs Corp of Boise, ID, USA (which has chip fabrication facilities in Hsinchu Science Park, Taiwan), has reported revenue of $9.96m, up 30% on $7.68m a year ago but down 23% on $13m last quarter.

After rising from 41% a year ago to 51% last quarter, gross margin has fallen to 23%, impacted by previously announced pricing pressure, lower capacity utilization, change in product mix, and a shortage in metal-organic chemical compound. SemiLEDs said in January that a particular customer (focused on the cell-phone camera flash market) had gone to a high-performance competitor based solely on price, and that SemiLeds had chosen not to pursue the business as it would have depressed margins further if the contract had been taken up.

On a non-GAAP basis (excluding foreign exchange losses), net loss was $0.74m, compared to net income of $3.9m last quarter and $1.93m a year ago. Nevertheless, cash flow from operations rose slightly from $1.6m last quarter to $1.7m.

Also, the initial public offering in December generated net proceeds of $95.5m (before deducting expenses of $3.4m), boosting cash and cash equivalents during the quarter from just $9.9m to $102.6m. SemiLEDs is using proceeds for expanding production capacity in Taiwan (doubling by August), R&D expenses related to LED chip production based on 6” wafers, and general corporate purposes (including working capital and capital expenditures).

“While we believe the long-term market opportunity of LEDs has not changed, the quarter did not meet our expectations relative to revenue, EPS or gross margin due to the aggressive, competitive pricing environment and our decision to preserve our market share,” says chairman & CEO Trung Doan. “Efforts to improve our gross margin include taking actions to improve our yield, transition to 4-inch wafers in our Taiwan facility, as well as ramping volume production of our new high-brightness LED chip, I-Do [launched in late March], which delivers up to 135 lumens per watt, enabling us to provide our customers with a very cost-effective lighting solution,” he adds.

For its fiscal third-quarter 2011 (to end May), SemiLEDs expects revenue to fall further to $6–7m, but gross margin should rebound to 25–30%.

Founded in 2005, SemiLEDs’ proprietary blue, green and ultraviolet (UV) ‘metal vertical photon’ (MvpLED) chip design features a vertical LED structure on a patented copper alloy base (after removal of the sapphire substrate) that provides what is claimed to be the best thermal resistance on the market — allowing better heat removal than for LEDs that retain the sapphire substrate — as well as electrical and optical advantages such as greater luminous efficacy and longer lumen maintenance. The firm fabricates LED chips for sale mainly to chip-packaging customers in China, Taiwan and other parts of Asia such as Korea, or to distributors who sell to packagers. It also packages some of its chips into LED components for sale to distributors and end-customers in selected markets (mainly for general lighting applications, including street lights and commercial, industrial and residential lighting).

See related items:

SemiLEDs’ revenue almost doubles year-on-year

SemiLEDs’ IPO raises $79m in net proceeds

SemiLEDs files for $172.5m IPO

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