LED chip supplier Formosa Epitaxy Inc’s (ForEpi, 璨圓光電) shareholders yesterday approved the company’s private placement plan to sell 120 million new shares at NT$19.6 each to China’s Sanan Optoelectronics Co (三安光電), raising NT$2.35 billion (US$80.8 million).
ForEpi said it planned to use the proceeds to expand plants in Hsinchu Science Park (新竹科學園區) and Taoyuan Pingjen Industrial Park. The deal is pending approval from the Ministry of Economic Affairs’ Investment Commission.
If approved, the sale will mean Sanan Optoelectronics acquiring a 19.9 percent stake in ForEpi via its Xiamen-based subsidiary, becoming the firm’s largest institutional shareholder, ahead of Japan’s Mitsui & Co, which holds 15 percent.
ForEpi chairman Chien Fen-ren (簡奉任) said at a special shareholders’ meeting that the company’s strategic collaboration with Sanan is expected to help double its sales in China in six months.
ForEpi’s sales in China currently account for 7 percent of its overall sales. Through the deal, the company expects that figure to increase to between 15 percent to 20 percent.
Sanan has more than 140 metal organic chemical vapor deposition (MOCVD) systems — used to manufacture LCD chips — while ForEpi and its subsidiary, Lucidity Enterprise Co (璨陽), have 58 and 37 respectively.
The alliance with Sanan forms part of Chien’s strategies to avoid neck-and-neck competition with major rivals in the LED market.
ForEpi announced in early 2011 that it was partnering with Mitsui and inked a cross-licensing agreement with Toyoda Gosei Co in October last year.
Given that ForEpi and Sanan manufacture different types of LED products and hold different patents, the two companies can complement each other in the future to meet client demand, Chien said.
As global demand for LED raw materials and sapphire substrates is currently strong and because ForEpi and Sanan together have enough capacity to meet demand, the two companies are well placed to negotiate prices with clients and lower costs.
In addition, “Sanan can introduce ForEpi’s products into the Chinese market and ForEpi can use its patent-holding advantage to enable Sanna to receive more orders from overseas clients,” Chien said, adding that ForEpi has received orders for LED backlit and lighting products from Chinese firms via its cooperation with Sanan.
Chien said he was optimistic about the outlook for the LED lighting industry in China, adding that Taiwanese firms, through cooperation with their Chinese peers, could gain upper hand against US, Japanese or South Korean rivals in the market.
ForEpi’s shares closed up 0.73 percent at NT$20.7 in Taipei trading yesterday, while the benchmark TAIEX closed up 0.74 percent.