Epistar Outlooks Slow Q417, Looks to Mini LEDs for Growth
November 27, 2017
Epistar reported a decline in revenue in October due to the slow season and estimated 4Q17 sales less than that of 3Q17. However, Epistar’s outlook for 2018 is positive with the momentum from collaboration with display makers on Mini LED-lit displays. The company expects to launch a new generation Mini LED-lit LCD displays in 1H18 and ramp up the wafer production for VCSEL to join supply chains of U.S. smartphone brands. Epistar started producing VCSEL wafers with existing equipment two years ago, currently providing them to customers that manufacture VCSEL for visible light communication (VLC). It is rumored to be certified by Lumentum and earn orders from IQE, which adds more possibilities for it to enter the 3D sensing supply chain for U.S. smartphone brands. Epistar uses a few 4-inch MOCVD machines to produce VCSEL wafers and is expected to introduce 7-15 more 6-inch MOCVD machines into production. An MOCVD machine produces 400-500 wafers per month and each wafer is priced USD 2,000 or above. VCSEL should be able to create an EPS of NTD 1 in 2018 if the production yields, quality control, and the number of orders earned match Epistar’s expectations. Epistar appears to be quite reserved on LED chip prices for 2018 considering that the competition with China gets intense as their chip capacity keeps scaling up. Epistar projects the price of blue LED chips in 2018 to slump by 10%. Epistar will develop new applications such as Mini LED, Micro LED, and VCSEL, adjust its product mix, and improve the cost structure in response. Challenges in the mass transfer process have put a heavy drag on the mass production of Micro LED, while Mini LED is rather likely to hit the market in 1H18 through a close collaboration between Epistar and display makers AUO and Innolux. Ultra fine-pitch LED display is another segment where Mini LED can shine, said Epistar. As of now, the company supplies 300m sets of RGB LED for displays per month, less than 3% of the global supply. Epistar is expected to raise its capacity in this market.
As a corollary to the Epistar report, Paul Peng, CEO of AU Optronics (AUO) said the company would adopt mini LED chips for backlighting in 2018, but the move will not affect its development of Micro LED applications, which will take a long time to commercialize. AUO was a shareholder of US-based micro LED developer LuxVue Technology, until it was acquired by Apple in 2014. He said, Micro LED technology development is difficult, as it involves different fields including precision machinery, semiconductor, testing and inspection, and needs many breakthroughs, Peng noted. Micro LED will still be in the development stage in 2018-2019, but many product samples are expected to come out during the period, Peng said. Micro LED must be proved to be feasible before volume production can be scheduled, Peng indicated, adding it will take a long time before micro LED can be commercialized.
Mini LED reduce the size of chips used in direct-type backlighting, and a backlight unit (BLU) for a notebook panel may need 6,000-7,000 mini LEDs, with better brightness, color and contrast than current LED chips, Peng noted. However, mini LED BLUs incur higher costs and therefore are unlikely to be adopted for inexpensive products such as notebooks in the US$500 range, Peng said. But they can be used in niche-market applications, such as those for gaming notebooks, PCs and professional displays, priced over US$1,000, Peng noted, adding AUO is in talks with clients about possible mini LED backlighting applications. For Micro LEDs, due to challenges in mass transfer technology, they are unlikely to be adopted for TV, Peng noted. But micro LED is better than OLED in terms of service life and better than LCDs in terms panel thickness and contrast, Peng said. Micro LED, which is also better than OLED in resolution and LCDs in response time and are most likely to be used in AR (augmented reality) and VR (virtual reality) devices, Peng indicated. Micro LED panels will also be suitable for use in smartphones but would be less competitive in cost, Peng noted, adding micro LED applications for smartphones may come after they have been successfully used in other products, Peng said. While it needs at least NT$200 billion (US$6.63 billion) to construct a 10.5G LCD line, it costs only NT$10 billion or less to set up a micro LED fab as a large portion of existing TFT-LCD equipment and manufacturing process can be used to produce micro LED panels, Peng explained. Micro LED carries importance for Taiwan's TFT-LCD and LED industries, for it promises a turning point for the local display industry, Peng indicated.
By way of contrast, Samsung Electronics is reportedly planning to unveil a Micro LED TV at the Consumer Electronics Show in January. According to ZDNet Korea, the top of the line TV will be 150 inches. It will be commercialized sometime next year after the unveiling at Las Vegas. The same technology that Samsung used for its 4K-resolution cinema LED has been applied but smaller and the model is aimed at the home theatre market. It should be noted that the Micro LEDs are not supplied by Samsung Display, as the company has not committed to the technology.