Taiwan-based LED chipmaker Formosa Epitaxy expects LED chip demand to return to the levels of the first half of 2010 in February and March of 2011, and volume shipments for applications in tablet PCs will begin in February as well, according to company chairman Chien Fen-ren, noting that Formosa Epitaxy could post a new sales record in the second quarter of 2011.

Formosa Epitaxy will register NT$4.5 billion (US$150.56 million) in revenues for 2010, up 120% from 2009, and growth of 50% is projected for 2011, market analysts indicated. TV backlight, lighting and tablet PC applications will account for 60%, 15% and 15%, respectively, of sales.

Chien pointed out that Japan's Nichia and Toyoda Gosei are the LED chip suppliers for Apple's tablet PC. However, other vendors such as Samsung Electronics and LG Electronics could begin sourcing from LED chipmakers in Taiwan, which should be a boost to gross margin, he added.

With LED TV market penetration expected to increase substantially in 2011 due to falling prices, Chien expects gross margin for the sector to take a hit. But gross margin will still maintain at 30-35% in 2011 thanks to new applications such as the tablet PC.

For pico projectors, Formosa Epitaxy will ship about 10-20 million LEDs in the fourth quarter, about 2-3% of the company's quarterly revenues but ASP is 6-7 times higher than conventional chips, Chien said.

Formosa Epitaxy's Taiwan facilities are equipped with 56 MOCVD machines, capable of producing 12 million epitaxial wafers a month. By the end of 2011, monthly capacity should rise to 15-20 million wafers.

In 2011, MOCVD equipment in Taiwan and China will combine for 126 units, and the company's projected capital expense will total NT$4-5 billion.

In related news, Formosa Epitaxy announced the inauguration of its LED chip subsidiary based in Yangzhou, China. LG Display, Amtran, Unity Opto and Wooree are also major investors of the company. The subsidiary's revenues for 2011 are projected to reach CNY300-500 million (US$44.95-74.92 million), and could become China's largest epitaxial wafer maker in 2012 when it completes the installation of 50 MOCVD machines.