18 January 2011

SemiLEDs’ revenue almost doubles year-on-year

Late last week, SemiLEDs Corp of Boise, ID, USA (which has chip fabrication facilities in Hsinchu Science Park, Taiwan) reported revenue for its fiscal first-quarter 2011 (to end-November 2010) of $13m, up 94.1% on $6.7m a year ago.

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 (0.4°C/W) — allowing better heat removal than for LEDs that retain the sapphire substrate — as well as electrical and optical advantages such as greater luminous efficacy (more than 120lm/W) 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).

Gross margin has risen from 27.4% a year ago to 51%, while operating margin has risen from 9% to 37.7%. Net income was $3.8m, up from $0.36m a year ago, despite a foreign currency transaction loss of $0.6m. However, despite cash flow from operations of $1.6m, cash and cash equivalents fell from $13.5m to $9.9m during the quarter.

Just over a week after the end of the quarter, on 9 December SemiLEDs completed its initial public offering (which was oversubscribed more than 10-fold), generating net proceeds of $95.5m (before deducting expenses estimated at $4m). SemiLEDs intends to use 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). The firm is already building additional capacity through an LED chip-making joint-venture China SemiLEDs (Xurui Guangdian Co Ltd) formed in January 2010 in Foshan, Guangdong Province (to be operational next month).

After opening trading on NASDAQ under the symbol ‘LEDS’ at $24.01 (41% above the $17 IPO price), the firm’s share price subsequently traded at $28–30 until the reporting of its fiscal Q1 results.

However, the firm also reported that, for its fiscal second-quarter 2011 (to end-February), it expects revenue to fall to $10.5–12.5m, with net income shrinking to $1.6–2.6m and gross margin falling to 44–46%.

This decline reflects pressure on selling prices during the quarter, according to chairman & CEO Trung Doan, attributing the main cause to “a particular customer going to a high-performance competitor based solely on price”, which would have depressed margins if the contract had been taken up. “The magnitude of the pricing pressure was so large we chose not to pursue this business,” he adds. SemiLEDs’ share price subsequently fell by more than a third to about $19.

However, the lost business was with a client focused on the cell-phone camera flash market, which is not representative of other sectors of the LED market, such as general lighting. “The LED lighting market remains strong, particularly within Asia, and we are well positioned to take advantage of this, both through our Taiwan operations and China SemiLEDs,” believes Doan.

See related items:

SemiLEDs’ IPO raises $79m in net proceeds

SemiLEDs files for $172.5m IPO

Tags: SemiLEDs

Visit: www.semileds.com

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