As Taiwan leading LED enterprise Forepi and its mainland counterpart San’an has formed a partnership, Taiwan LED industry will see some mergers. Huga Optotech Inc will officially become Epistar’s subsidiary on Dec 28 and Lexstar to become a part of Wellypower Optronics Corporation on February 1^st 2013, alongside waves of LED enterprises’ closedowns in mainland China this year, the market forecasts 2013 to be a year of M&A for cross-strait LED makers.

The premium wafer maker San’an and the LED packager, Elec-tech, both are industry giants in mainland China. The former is supported by government incentives, which still has sufficient capital to compete with its competitors, while the latter has already been struggling this year, with probability of a plunge in net profit margin. Word has it that Elec-tech would use government bailouts to improve its performance- on paper.

Despite being endowed with superior technology and finance, Taiwan LED enterprises are still faced with the inevitable M&A when overcapacity is lingering and profitability is weakening due to intensified competition. When it comes to mainland LED enterprises, they have been relying on government incentives to substantially expand capacity, resulting in unbalance between demand and supply. As global economy remains sluggish and LED industry has slipped into downturn, mainland LED enterprises are expected to witness a surge of shutdown. As the market projects, the number of mainland LED makers will shrink from over 100 to within 10.