LED packaging house Ledtech Electronics has revealed that sales of its low temperature light bars are expected to suffer a sequential decline for the first time in the third quarter of 2010 amid slackening demand. However, the company may receive orders for in-door LED lighting products from new clients in the remainder of 2010 pushing sales of the segment to account for 5% of total revenues in the fourth quarter.

Ledtech's low temperature light bars are mainly used in products such as freezers or showcases and the company's major clients include the US-based Coca-Cola, Pepsi and freezer product company, IR. The three clients together contributed NT$100 million (US$3.2 million) in the second quarter with low temperature light bars accounting for 40%. Combined sales from the three clients in the first half were NT$200 million.

The company expects its third-quarter revenues to drop 10% sequentially as orders in September had an obvious drop; however, revenues for the fourth quarter are expected to pick up as clients will start preparing for the demand during the summer of 2011.

Ledtech has also recently sent low temperature light bar samples to Taiwan's retail stores. As for Europe, affected by the dropping economy, the market only had limited opportunity, while the company has started shipping a small volume of orders to Japan.

In addition, Ledtech has recently received LED orders from Taiwan's Railways Administration for supplying 400 LED lamps to Taoyuan train station and the company expects to have a chance of landing more orders by the end of 2010.

The contribution from Ledtech's product assembly business was about 58% of its combined revenues from January-August 2010 and the company expects the percentage will jump to around 60% in the fourth quarter with the annual average to be around 50-60%, up from 53% in 2009. The remaining revenues contribution was from the company's component business.

As for gross margins, Ledtech's average gross margin for product assembly business from January to August was about 36% and the company expects the average gross margin for the whole year to remain at 30% despite LED lighting business, which has lower margins, pulling down the performance of its low temperature light bar business. The company has already raised its SMD LED capacity from 40 million units in early 2010 to 60 million units currently and is planning to expand its LED light bar capacity to 100,000 units by year-end.