With cost of materials such as sapphire substrates on the rise, LED chip maker Epistar's gross margin is projected to fall from 38.9% in the second quarter to 36% in the third quarter, according to market analysts. Though the company's September revenues slid sequentially, record totals in July and August pushed third-quarter revenues up 8.3% on quarter to NT$5.68 billion (US$184.38 million).

Epistar was running at full capacity in the third quarter, but were mostly producing lower margin products for applications in side-view products, according to industry sources.

With flat growth expected for October revenues, and sales could continue to fall in November and December, Epistar's fourth quarter revenues is projected to decline 6% sequentially to NT$5.3 billion, analysts said.