The Investment Commission approved for Chinese LED epitaxy manufacturer San'an Optoelectronic Co. to invest in Taiwan LED chip supplier Formosa Epitaxy Inc. (ForEpi). Cooperation between the two companies marks a new milestone and will intensify LED industry cross strait co-opetition. Approval for the cooperation between the companies was deliberated on by the Investment Commission for more than 6 months. After receiving approval, San'an will purchase shares for NT $2.3 billion within 15 days. Once San'an’s investment is secure, ForEpi will have more room to grow, such as expanding the company’s production capacity.
The investment plan was drawn up between San'an and ForEpi on November 13th 2012 and submitted to the Investment Commission for review, leaving everyone to speculate on whether or not it would pass. On the 29th of this month, the commission announced that the plan was approved and that the two companies could carry out their investment plan.
ForEpi sold 120 million shares to San'an via private placement for NT $19.6 each which cost San'an a total of NT $2.3 billion giving the company 19.9 percent stake in ForEpi becoming the company’s largest shareholder.
Strict Conditions Laid Out by the Ministry of Economic Affairs
In order to prevent transfer of technology and personnel through the investment plan, the Ministry of Economic Affairs demanded the Chinese firm promise to the conditions that no patents will be passed between the companies, no talents will be headhunted, San'an has no management rights, and that there can be no transfer of technology. These strict conditions laid out by the Ministry are to protect and maintain domestic industry superiority, prevent against hurting job opportunities for local citizens, and local developed technology. Currently San'an has agreed to all conditions.
The Progression of Cooperation between ForEpi and Sanan
ForEpi admits that cooperation between the two companies had already begun even before the investment approval. However the contribution towards the company performance is still lacking. Investment from San'an was placed entirely into the expansion of the Ping-Jen factory’s production capacity. The factory expanded its MOCVD machines by 15 this year with a capital expenditure of NT $3 billion. For further expansion plan this year, ForEpi now has the backing from San'an funds.
ForEpi’s current factories in Ping-Jen, Longtan, and Chinese subsidiary factory Lucidity have roughly 107 MOCVD machines. The company plans to expand the number of MOCVDs in Ping-Jen following an increase in LED demands. After San'an became the company’s largest shareholder, the two large epitaxial manufacturers will have a total of about 270 MOCVD machines between them.
Aside from investment with San'an, on July 16th of this year the company announced its joint venture with TLC Group and Chinese LED packaging manufacturer Refond, which will be responsible for LED backlight modules in the future and hopefully later lead to vertical integration between the companies.
