Chinese LED maker plans major investment in Taiwanese chip company

Nov. 16, 2012
San’an Optoelectronics intends to invest around $80 million to obtain a 19.9% stake in Formosa Epitaxy.
San’an Optoelectronics Co. Ltd, one of China’s largest LED makers, plans to invest NT$2.35 billion (approx. $80 million) in Formosa Epitaxy (Forepi), a Taiwan-based manufacturer of InGaN-based LED wafers and chips.

The deal, which is subject to regulatory and board approvals, would give San’an a 19.9% stake in Forepi.

San’an plans to acquire, via its 100-percent owned Xiamen subsidiary, up to 120 million new shares in Forepi at NT$19.6 per share, according to the Taipei Times. San’an will become Forepi’s largest institutional shareholder, ahead of Japan’s Mitsui & Co, which holds 15% of the company (see Related Stories).

If approved, the deal is set to become the biggest single investment by a Chinese firm since Taiwan relaxed rules on mainland investment in 2009, according to an AFP article.

San’an’s website says that the company has more than 150 MOCVD systems, making it “the largest production base for LED epitaxial products in China.” As well as LED wafers, the company also produces LED chips, sapphire substrates, and solar-cell products.

Formosa Epitaxy, the second largest LED chipmaker in Taiwan, said the new capital from San’an Optoelectronics would help strengthen its financial position, expand its business scale and enhance its competitiveness, according to the Taipei Times article.

The same article speculates that other Chinese companies, including Hangzhou Silan Azure and BOE Technology Group, have been talking to Taiwanese LED makers about potential partnerships. However, this may not be beneficial in the long term for the Taiwanese companies if the Chinese firms upgrade their technology through recruiting engineers from Taiwan-based firms and expanding production capacity.