Taipei, April 18 (CNA) Shares of light emitting diode (LED) lighting vendors moved higher in Taipei Wednesday after local media reported a surge in orders for several major companies in the sector in reaction to looming electricity rate hikes, dealers said.
Cree Inc., a U.S.-based LED lighting maker, reported, lower-than-expected results for the quarter to March, however, casting shadows over its Taiwanese counterparts as concerns over their profitability remained in place, they said.
As of 11:33 a.m., shares of Unity Opto Technology Co. had added 3.00 percent to NT$34.30 (US$1.16), shares of Everlight Electronics Co. had gained 2.89 percent to NT$64.00, and shares of Edison Opto Corp. had risen 2.03 percent to NT$65.40.
The weighted index was up 0.47 percent to 7,621.52.
According to the report, several major LED lighting firms, such as Everlight, Edison and Unity Opto, have received large orders from corporate customers who want to cut operating costs through wider use of energy-efficient lighting.
The report said the increase in orders in LED lighting have even boosted demand for LED chips and will lead to full capacity utilization at upstream suppliers in the LED chain in the second quarter.
"The increasing demand for LED products is simply a reaction to the government's recent announcement that it will hike electricity rates," Mirae Asset Management analyst Arch Shih said.
Last week, the Ministry of Economic Affairs announced that starting from May 15, household electricity rates will increase by an average of 16.9 percent, commercial electricity rates will rise 30 percent and industrial rates will go up 35 percent.
"We estimate that the latest wave of incoming orders are likely to boost sales of these LED firms by about 30 percent in the second quarter," Shih said.
Shih still had doubts, however, about whether these LED vendors will be able to translate rising sales into satisfactory profits.
"Look at the worse-than-expected results posted by Cree. I remain cautious about the profitability of the LED sector due to high production costs," Shih said. "Unless they can cut costs, their bottom lines are still squeezed."
Cree shares plunged 6.6 percent on Wall Street after its results missed market expectations.
In addition to the increasing order report, Shih said, the current buying of local LED stocks represented a technical rebound from a slump seen in the broader market a session earlier.
"Investors still need to be careful when trading LED stocks," Shih said. "I'm afraid that once they fail to deliver satisfactory results, their shares will encounter pressure."
(By Frances Huang)