Interview with MLS CEO: MLS poised to closely cooperate…

Germany’s Federal Ministry of Economics and Technology as well as Committee on Foreign Investment in US (CFIUS) under the US Department of the Treasury have approved Germany-based Osram Licht AG’s proposed sale of Ledvance, its lamp business unit, to a China-based consortium of which MLS, the largest China-based LED packaging service provider, is one of three members with a 35.7% stake.

Following is an interview with MLS CEO Lawrence Lin.

Q. What do you think of the deal?

A. MLS has had concerns about the progress of German and US authorities’ examination. As the deal is focused on general lighting products and does not involve sensitive technologies and products, Germany’s Federal Ministry and CFIUS gave the green light to the sale and later the China authority concerned is expected to do so as well, thus the transaction is expected to be finished in the first half of 2017.

While China is a major producing country for LED lighting, there is a great deal for China-based enterprises to learn about own-brand business operation. MLS will cooperate with Ledvance by combining MLS’ manufacturing capability with Ledvance’s international brand reputation and marketing resources.

Q. MLS has its own LED lighting brand Forest Lighting; how will MLS position its own brand in line with development of Ledvance?

A. Forest Lighting and Ledvance will be in a dual-marketing collaboration, with the former tapping emerging markets including Southeast Asia, China and India and the latter marketing products in mature markets such as North America and Europe. In addition, through MLS’ 35.7% stake in the consortium — and thereby in Ledvance — MLS expects priority for supplying LED lighting products for Ledvance.

LED lighting accounts for a small portion of Ledvance’s consolidated revenues currently and therefore has large growth potential for Ledvance’s business operations. MLS hopes to help Ledvance become one of the world’s three largest lighting vendors via stable development for 5-10 years, with annual consolidated revenues to increase from about EUR2.0 billion (US$2.12 billion) at present to over EUR5.0 billion then.

Q. LED industry appears to be rebounding, what are your opinions about developments in the industry?

A. LED lighting has been and will continue to be the major source of growth for LED industry. Volumes of LED chips and packaging used in LED lighting will significantly grow, but the corresponding production values will increase only slightly due to continued drops in price. Prices for LED chips and LED packaging in 2016 fell about 20% on year on average and will do so in 2017.

In addition, demand for fine pixel pitch LED displays took off in 2016 and will keep growing in 2017 while that for LED backlighting is shrinking due to adoption of OLED panels.

Noteworthy is increasing concentration in the LED industry, with large LED chip makers and LED packaging service providers taking up an increased portion of total production value. Among China-based LED packaging service providers, those with an annual production value of US$200-300 million will play an influencing role. The global top-10 LED packaging service providers will each have annual production value of over US$500 million.

Q. How will MLS expand production capacity in 2017?

A. MLS expanded monthly packaging capacity from 35 billion LED chips in 2015 to 50 billion units in mid-2016 and further to 70 billion units at the end of 2016. MLS originally planned to expand monthly packaging capacity to 100 billion LED chips in 2017 but has decided to increase the target to 150 billion units, with 60-70% of the additional capacity for producing fine pixel pitch LED displays and the remaining for producing LED lighting including supply for Ledvance. For LED lighting in particular, capacity expansion will focus on LED light tubes, LED filament light bulbs and LED panel lights as well as addition of automated equipment for producing LED light tubes.

Q. Why are you optimistic about growth in demand for fine pixel pitch LED displays? What is MLS’ target global market share?

A. It is sure that global demand for fine pixel pitch LED displays will continue growing over the next three years, with LED chips used in such displays to increase from 60 billion units in 2016 to 90-100 billion units in 2017. MLS’ global market for such displays stood at 50-60% in 2016 and is aimed at over 60% in 2017.

Fine pixel pitch LED displays feature one of three main packaging specifications in terms of pitch, 2020, 1010 and 0808, with 2020 accounting for about 80% of market demand due to price competitiveness and 0808 for less than 10%. MLS currently focuses on 2020 but in 2017 we will increase production for 1010 which is expected to gradually become the mainstream specification over the next few years. In contrast, Taiwan-based LED packaging service provider Everlight Electronics focuses on 1010 and 0808.

In terms of application, commercial advertising accounts for about 60% of fine pixel pitch LED displays and sports gymnasiums and stadiums for about 30%. Most of such displays have sizes of over 150 inches.

Q. What are MLS’ motivations of stake investment in China-based LED chip makers? What is MLS’ relation with Taiwan-based LED chip maker Epistar?

A. The stake investment in KFES Lighting (Xiamen) is to solve problems in patent infringement for sales in overseas markets, that in HC SemiTek is for supply of LED chips used to produce LED displays and the one in Huaian Aucksun Optoelectronics Technology is for supplying LED chips used in LED lighting. MLS has been in long-term partnership with Epistar, including the latter’s exclusive supply of red-light LED chips.

Q. What are your viewpoints of, and outlook on the US and India LED lighting markets in 2017?

A. In the US LED lighting market, prices are not a problem but there are strict requirements for product quality and consumers are relatively conservative about adopting LED lighting. Thus, demand in the US LED lighting market may not grow as fast as expected. The India LED lighting is characterized by the government’s open-bid procurement projects which take up 70-80% of total demand. The India government will hold additional open bids to procure LED light bulbs and MLS may participate in the competition.

Lawrence Lin, MLS CEO
Photo: Shihmin Fu, Digitimes, February 2017

Categories: LED LED applications

Tags: CEO Interview

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