Seoul Semiconductor moves half of chip equipment to Vietnam

Hit by LED market woes punctuated by cheap Chinese products, South Korea’s Seoul Semiconductor has moved at least half of its LED chip equipment to Vietnam up to the third quarter of this year, industry sources said on Nov. 21.

The company has been actively expanding its facilities in Vietnam’s Ha Nam Province. By the end of 2020, it plans to move at least two-thirds of its production capacity there.

Originally, the plan had been to undergo a more gradual move up until next year. “Inventory had been piling up since the latter half of last year, causing the average sales price (ASP) of LEDs to go down as well, so it seems like the company saw no reason to put things off any longer,” said one source close to the matter.

This year, the decrease rate of quarterly ASP was well over 15% in both the first and second quarters. In the fourth quarter, prices are expected to show a 10% decline. In addition to the chip equipment, the Korean firm is seen to have relocated more than 30% of its packaging facilities to Vietnam as well.

Seoul Semiconductor has been hit by cheap Chinese products for a while now. This year, it won several patent lawsuits against its Chinese rivals, but it became impossible to fight the competition.

The firm ran at only about 64% of its production capacity at plants in Gyeonggi Province, China’s Tianjin and Vietnam in the third quarter. The figure was 61% in the first half of this year, comparing with the 78% in 2018 and 80% in 2017.

In the third quarter, the firm recorded sales of 848.5 billion won to record a 5% decline, while operating profit tumbled 43.2% to 35.6 billion won. Fourth quarter sales are expected to stand at around 270 to 290 billion won.

“It won’t be until the mid-2020 that the company unloads inventory and attains more orders,” said another market source. “Next year, we expect LED demand to pick up on the Tokyo Olympics.”

By focusing on Vietnam, Seoul Semiconductor is hoping to cut costs involved mostly with taxes and personnel. It also believes it has much to gain in terms of logistics and customs as well, given the significant growth of the LED lighting market in ASEAN countries.

The Elec is South Korea’s No.1 tech news platform.