White LED price cuts reduce Nichia's sales, profits

Nichia Corp., the world's leading LED manufacturer, is expected to report sales of 195 billion yen ($1.645 billion) for the fiscal year ended December 31, 2005, according to an article in the Japanese newspaper Nihon Keizai Shimbun.

This figure will represent a decrease of 5.5% from the figure of 206 billion yen reported for fiscal 2004.

The company will probably also report a consolidated pretax profit of 78 billion yen, down 17.6% compared with the previous year.

This will mark the first time since fiscal 1993, when Nichia first launched its blue LED products, that both profit and revenue have fallen.

While net profit is predicted to remain above 40 billion yen, it is likely to slip by more than 10% compared with fiscal 2004 when the firm earned 56 billion yen.

The reason for the decline is the falling prices for white LEDs, of which Nichia is the dominant global producer. In fact, production of all LEDs increased by16%.

However, white LED prices declined throughout the year, with year-end prices 30% lower than at the start of the year.

Nichia lifted capital spending by 13% to 35 billion yen, using the funds for its new Naruto plant in Tokushima Prefecture, slated to come online in July, as well as for expanding its headquarters plant.

Similar to last year, the firm spent 15 billion yen on research and development.

For fiscal 2006, sales are anticipated to climb to the 200 billion yen mark. In the medium term, the company aims to post sales of 210 billion yen in fiscal 2008.