Expanding SemiLEDs files for $172.5M IPO

Targeting the market for solid-state lighting (SSL), SemiLEDs sells green, blue and ultraviolet LEDs, chiefly to China, Taiwan and the rest of Asia. The company is yet to set a target share price for the offering, but the proceeds of the IPO will go towards expanding manufacturing capacity, and developing LED production on larger wafer sizes.

Although it fabricates gallium nitride (GaN) LEDs on sapphire – the most conventional approach – SemiLEDs also uses some key proprietary technology to enhance device performance. The most crucial element of this is a vertical, copper-alloy chip structure that aids heat removal compared with conventional GaN-on-sapphire chips.

The excess heat generated at high operating currents is one of the major technical challenges associated with developing LED technology for SSL applications, and thanks to the vertical structures SemiLEDs claims to have increased the efficacy of its best packaged devices from 60 lm/W in 2006 to 140 lm/W this year.

SemiLEDs is timing the IPO just as the SSL market is beginning to take off. Strategies Unlimited estimates that the market for LEDs used in general lighting will grow from $665 million in 2009 to more than $4 billion by 2014 – part of the global general lighting market currently estimated at some $100 billion by the Freedonia Group.

2012: breakthrough year
Other commentators have recently suggested that 2012 will witness the “breakthrough year” for SSL, as the up-front cost of the technology is reduced to a level that is more competitive with fluorescent lighting.

SemiLEDs is aiming to reduce those up-front costs through a combination of low-cost manufacturing in Taiwan and China, as well as shifting production to larger LED wafer sizes.

“We plan to increase our investment in research and development to improve our manufacturing processes and increase our production yields to reduce the per-unit cost of our products,” wrote the company in its S-1 filing with the US Securities & Exchange Commission.

“In particular, we are developing new technologies to enable us to produce LED chips using larger-size wafers. We intend to use the net proceeds received from this offering to expand production capacity, and to build a test line for research and development related to LED chip production based on 6-inch wafers.”

SemiLEDs is already building additional capacity through a joint-venture company called China SemiLEDs, with a new facility set to enter production in January 2011. In recent months, the company has, like much of the LED industry, become capacity-limited as demand for LEDs used in streetlights and related applications has increased significantly.

Having posted a net loss in its last two fiscal years, SemiLEDs has seen its sales recover quickly in fiscal 2010. For the first nine months of its financial year, which ends on August 31, it posted $24.3 million in sales – up from just $7 million over the equivalent period in 2009.

“In the near term we will focus on outdoor street lighting in China and applications where we believe the environmental benefits and lower cost of ownership will play a larger role in the purchasing decision,” the company concluded.