Proposed investment in Advanced Optoelectronic Technology Inc (先進開發光電) by Hon Hai Precision Industry Co (鴻海精密) reflects the latter's strategy of increasing the vertical integration of its light-emitting diode (LED) business, analysts said yesterday.
"Hon Hai now owns Foxsemicon Integrated Technology Inc (
With connections in the mid and downstream supply chain secured, Hon Hai should acquire LED upstream makers soon, the note said.
Shares of Advanced Optoelectronic gained 32 percent to NT$94 (US$2.90) on the GRETAI Securities Market, while Hon Hai shares dropped 2.3 percent to NT$277.5 on the Taiwan Stock Exchange.
Citigroup's note came after Hon Hai said on Tuesday night in a stock exchange filing that it would acquire a 19.9 percent stake in Advanced Optoelectronic, an LED downstream packager.
Hon Hai plans to invest in Advanced Optoelectronic through its investment units, Transworld Holdings Ltd and Bao Shin International Investment Co (
The world's largest contract electronics part maker said it would spend NT$360 million (US$11 million), or NT$10 apiece, in the private share sale.
"Growth for Hon Hai in the LED industry is feasible judging by its solid relationship with the Chinese government, whose energy policy favors LED street lights," Gai said in the note.
Hon Hai will supply LED street light solutions to a mid-sized city in northern China, likely boosting Foxconn's earnings next year, the note said.
Lu Chia-lin (
Listed since 2005, Hsinchu-based Advanced Optoelectronic posted a 1.43 percent decline in sales for the first six months to NT$995 million.
Its revenues last year declined 33 percent to NT$1.86 billion after a lawsuit filed by Nichia Corp caused a loss of orders from South Korean customers.
In related news, the Chinese-language Commercial Times yesterday mistakenly reported that Hon Hai had invested in Ability Opto-electronics Technology Co (先進光電), whose name in Chinese is similar to that of Advanced Optoelectronic.
This caused shares of Ability to rise nearly the 7 percent daily limit to NT$21.90.
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