MMS Ventures looks to bounce back

MMS Ventures Bhd, a leading Penang-based light-emitting diode (LED) test equipment manufacturer, is staging a comeback after being mired in the red for three years.

The group also expects to close the 2013 fiscal year with the best results in the past five years.

Group managing director TK Sia told StarBizWeek that the group’s capability to produce customised LED test equipment for customers in the US and multi-national corporations (MNCs) in Malaysia was instrumental in the group’s turnaround. The company focused previously on making semiconductor material test handlers.

MMS received approximately RM25mil worth of orders for the first half of last year, compared to about RM12mil in 2012’s corresponding period, according to Sia.

MMS has been in the red in 2008, 2009 and 2012. It expects to close last year with sales of over RM26mil, according to Sia.

“Our sales have been good in the first half 2013 because we offered customised integrated test solutions for the LED industry at competitive prices. We have a formula to avoid high customisation costs, and ensure that our LED test equipment are able to serve different applications,” he said.

MMS’ customised LED test equipment are capable of performing vision inspection, test handling tasks, and laser-marking identification codes on the LEDs and checking the brightness and colour of LEDs.

LED test equipment with integrated functions are sold between RM1mil to RM2mil per unit in the international market today.

“Such equipment reduces the need of our customers to outsource some of the processes. They can do their own vision inspection and laser-marking tasks.

“This means at the productin floor level, there will be fewer operators and engineers needed to man the production process of LED modules.

“Generally, our LED test equipment helps to cut down the LED cost of production by 20% to 30%,” Sia says, adding that in an extremely competitive environment, customers eventually look at reducing cost of production.

Sia says the margin for test equipment has improved to 25%, compared to 20% three years ago, despite increasing pressure to lower equipment costs in a competitive LED industry.

“One important market is the demand to test chip-on-board (COB) LEDs that have a very high brightness and are used in general lighting, like street lamps.

“This segment generates about 30% of the group’s business.

“The LED test equipment are also sold to the electronic devices consumer and automotive lighting sectors to check the LED modules used in the respective products,” he says.

COB is a new cost-effective LED packaging technology that packs multi-LED chips together as one lighting module to generate a higher degree of brightness.

The group’s LED business generates about 70% of group revenue annually.

“The first quarter this year is expected to be soft, compared to the previous year’s corresponding period, he says.

The LED industry slowdown has to do with the drop in sales of metal-organic chemical vapour deposition (MOCVD) systems, which is critical to the production of LED crystals, according to Digitimes Research, the research arm of Digitimes, Taiwan’s leading high-tech firm.

“For us it is important to be aware of the trends in the LED industry. That helps us to provide the most suitable test solutions to our customers,” Sia says.

MMS also sees its semiconductor test equipment handlers, which are used for testing integrated circuits, to increase its contribution to the group’s revenue to 30% last year, up from 15% in 2012.

“The equipment is sold in the market at around US$150,000 to US$200,000 per unit.

The margin of this segment is not very high, but the sales volume is strong, Sia says, adding that they are making the test handlers for an American brand.

According to SEMI vice-president and chief marketing officer Tom Morrow, the LED industry is expected to rebound this year due to the rise in LED wafer fabrication equipment spending.

SEMI is the global industry association serving the manufacturing supply chain for the micro-and nano-electronics industries.

It has 2,000 members.

“In 2014, LED wafer fabrication equipment spending will rise 17% to nearly US$1.2bil in 2014, following a 30% decline last year and 45% decline in 2011,” Morrow said.

Semiconductor equipment sales is projected to reach US$43.98bil in 2014, a 21% increase over 2013, according to a SEMI report.

The SEMI report says that key drivers for equipment spending are NAND flash fabrication investments by Samsung in China and Toshiba in Japan, and investments by Intel.

NAND flash memory is a type of non-volatile storage technology that does not require power to retain data.