Mainland China-based San'an set to become Forepi's biggest shareholder
By Kathryn Chiu ,The China PostTAIPEI, Taiwan -- Xiamen-based San'an Optoelectronics Co. on Friday received the Taiwan government's conditional approval for investing in Formosa Epitaxy Inc. (Forepi, 璨圓光電), becoming the largest shareholder of Forepi at around 19.9 percent stake.
August 31, 2013, 12:03 am TWN
The investment marked the first case of mainland capital to enter Taiwan's LED industry, but San'an Optoelectronics Co. (San'an Opto, 三安光電) was denied the rights including technology process and patent transfers, participation in Forepi's management and operation, and talent searching in Taiwan's LED industry.
According to a news release of Investment Commission under the Ministry of Economic Affairs (MOEA), San'an Opto will use self-raised capital of no more than NT$2.352 billion to purchase common stock of a private placement by Taiwan-listed company Forepi.
Forepi announced last November that it would issue 120 million shares of private equity at about NT$19.6 per share, and requires the total maximum amount of NT$2.352 billion or more to introduce capital from San'an.
If Forepi's total capital increases to about NT$6.016 billion, then San'an will own 19.9 percent of Forepi shares to become the single largest shareholder, a proportion higher than 15 percent of the current largest shareholder, Mitsui of Japan.
The Industrial Development Bureau (IDB) under the MOEA yesterday said that it has set San'an “four-nos” ground rules in exchange for the approval. Those rules include no patent transfers, no talent-sussing in Taiwan, no involvement in Forepi's operations and no process technology transfers.
IDB called those rules “preventive measures” meant to protect the current advantages of Taiwan's LED industry.
According to the United Evening News, San'an has agreed to comply with the “four-nos” ground rules and the Investment Commission can force San'an to withdraw from Forepi if San'an is found in defiance of those rules.
However, IDB reiterated that it hopes the “cross-strait marriage” will be successful.
In the past few years, Forepi saw lower-than-expected development after its entry into the mainland market. This partnership represents Forepi's hope to take advantage of San'an's relationship with the mainland government and marketing channels to grow its business in mainland, IDB said.
Epistar's leading position unshakable
In the history of the LED upstream epi-wafer and chip industry, mainland enterprises were once cornered by their Taiwan peers in terms of product price-performance ratio. Especially in recent years, Taiwan LED epi-wafer and chip-makers, led by Epistar (晶元光電), have posted a threat to mainland enterprises via a series of integrations and acquisitions in the mainland LED industry chain.
The San'an-Forepi alliance will certainly give mainland Chinese LED manufacturers more of an competitive edge to gain access to the Taiwanese market. But many analysts believe that in the short term it is unlikely for San'an or Forepi to overtake Epistar's position in terms of either technology or market share.