Formosa Epitaxy Inc (ForEpi, 璨圓光電) said on Tuesday that its board of directors had approved a plan to establish a joint venture with two Chinese companies to make LED backlight modules and LED lighting products.
The LED chip supplier plans to invest up to 48 million yuan (US$7.83 million) in the joint venture through its Hong Kong-based subsidiary Full Star Enterprises Ltd (裕星企業), which will enable it to secure a 24 percent share in the joint venture, it said in a filing to the Taiwan Stock Exchange.
Chinese home appliance and consumer electronics maker TCL Corp will hold 51 percent share in the venture, capitalized at 200 million yuan, while LED packaging firm Shenzhen Refond Optoelectronics Co (瑞豐光電) will hold 25 percent, according to the filing.
ForEpi’s proposal has to be approved by the Investment Commission. The company’s earlier plan to sell a 19.9 percent stake to Chinese LED epitaxy maker Sanan Optoelectronics Co (三安光電) has been under review by the commission since the companies announced the deal in November last year.
However, ForEpi’s latest plan still excited investors and boosted its share 3.08 percent to end at NT$20.1 yesterday, outperforming the broader market, which fell 0.01 percent.
“ForEpi can strengthen its position in the Chinese TV market via the joint venture, given that TCL is the world’s third-largest TV maker and China’s largest with a 7.3 percent market share,” Primasia Securities Co analyst Filia Lin said in a note yesterday.
While ForEpi said it plans to manufacture LED modules, lighting and backlight products in the joint venture, Lin said he expects the joint venture’s long-term focus will be on LED lighting markets, given that TCL’s management said last month that development of global LED lighting market is increasing.
However, Lin said ForEpi would not receive significant return on its investment in the joint venture until next year because market demand for TVs is likely to slow down during the second half of the year after Chinese government ended its TV purchase subsidy program last month.
ForEpi has invested NT$2.89 billion (US$97.18 million) in China in the last three years, the company said in the filing. However, due to slack demand for LED products in the global market, the company’s Chinese investments have been in the red since 2010.
ForEpi’s plan to sell 120 million shares at NT$19.6 each to Sanan is still waiting for the Investment Commission’s approval after shareholders gave it the green light on Jan. 3 because of the accounting scandals surrounding Sanan and concerns over possible brain drain in Taiwan’s LED industry.