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SemiLEDs' stock rises on Nasdaq debut

14 Dec 2010

LED manufacturer raises $79 million from initial public offering; shares jump 50% in first trading session.

SemiLEDs, a manufacturer of high-brightness LEDs that are based on an innovative metal substrate design, has raised net proceeds of at least $79 million from its initial public offering (IPO) of stock on the Nasdaq stock exchange.

The US-headquartered company, which has an LED chip manufacturing facility in Taiwan, and is planning to construct another in mainland China, sold 5.25 million shares at $17.00 to raise gross proceeds of nearly $90 million on December 9. SemiLEDs has not yet revealed whether an overallotment option that would further boost proceeds had been exercised.

And after CEO Trung Doan rang the Nasdaq opening bell the following day, SemiLEDs’ stock climbed to just over $27 before settling at around $25 – giving the company a current market capitalization of approximately $185 million. The company is traded under the ticker symbol “LEDS”.

According to SemiLEDs’ prospectus, approximately $40 million of the proceeds raised via the IPO will be used to expand production capacity in Taiwan, including purchase of three additional reactors to manufacture LED wafers before the end of this year.

Another $10 million will also be spent on a test line for research and development of LED chip production on a 6-inch wafer platform – the company currently manufactures on 2.5-inch wafer sizes, and is set to begin commercial 4-inch wafer production in 2011.

Proprietary approach
SemiLEDs’ proprietary approach to LED production is unique in the industry. Its technology integrates a copper alloy with a vertical LED structure, delivering claimed efficacies of more than 100 lm/W from packaged emitters.

Its manufacturing process begins in standard manner, with epitaxial layers of gallium nitride (GaN) deposited on top of sapphire wafers. After that comes the proprietary element, with several different reflective metal layers of silver and copper alloy deposited by electroplating. The copper acts as a p-electrode. Next, the initial sapphire substrate is removed by a laser, before a negative electrode is formed on the opposite side of the chip to the copper alloy.

One of the advantages of that process is that the sapphire wafers can be re-used several times. And since sapphire is relatively expensive and typically accounts for a significant chunk of the total price of a GaN-based LED, that leads to a substantial cost saving.

A major benefit of using the copper alloy is its ability to conduct heat away from the LED semiconductor structure efficiently – a crucial requirement in getting LEDs to operate well at the high currents needed for general lighting applications.

In its latest financial year, which ended on August 31, SemiLEDs posted $35.8 million in revenues, and a net profit of $10.8 million. The company’s sales have increased sequentially every quarter since early 2009, and since March 2010 SemiLEDs said that it had been operating at or near full capacity.

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