NEW YORK (AP) — Tougher competition and lagging sales of chips will take a toll on SemiLEDs Corp., according to Jefferies & Co., which cut its ratings on the company Thursday.
SemiLEDs makes chips used for LED lighting and it is an industry that has been slow to recover from the recession.
While SemiLEDs has increased its percentage of component sales from 21 percent fiscal 2010 to 41 percent in the second quarter of this year, competitors are still less exposed to the sharp decline in prices, wrote analyst Jesse Pichel.
Cree Inc., for example, has roughly 75 percent component sales and less than 10 percent chip sales.
SemiLEDs is also competing with Epistar Corp. and Samsung Electronics Co. Chip prices have declined twice as fast as those for components, although the analyst said that rapid price declines earlier this year are slowing down.
The Pichel expects SemiLEDs will speed up its move into packaging faster than expected and this may increase company capital expenditures and cash burn.
Still, Pichel downgraded the stock to "Hold" from "Buy" and lowered his price target to $6 from $15.
SemiLEDs shares dipped 3 cents to $6.05 before the market opened.
There are no comments yet