Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), the world’s top contract chipmaker, yesterday said its board has approved a plan to sell its unprofitable LED subsidiary to Epistar Corp (晶電) for NT$825 million (US$25.85 million) in cash and exit from the highly competitive LED market.
TSMC will book NT$740 million in losses from selling the LED business, according to a company statement filed with the Taiwan Stock Exchange.
After the transaction is completed, Epistar, the nation’s top LED manufacturer, will hold a 565 million share (94 percent) stake in TSMC Solid State Lighting Ltd (TSMC SSL, 台積固態照明), according to a joint statement. Shares of TSMC SSL are priced at NT$1.46.
The transaction value is much lower than the NT$1.26 billion to NT$1.89 billion share swap Chinese-language Wealth Magazine reported on Dec. 2.
TSMC SSL “has struggled to reach profitability due to oversupply following the massive expansion of the LED industry in the past several years,” TSMC said in the statement. “As a late entrant, TSMC SSL has also faced difficulties overcoming patent obstacles and establishing sales channels.”
TSMC SSL has lost NT$3.65 billion over the past three years since its establishment in 2011, according to TSMC’s annual reports.
Related rules stipulate that the LED company requires an injection of new capital to improve its financial structure, after accumulated losses exceeded 50 percent of the LED company’s share capital of NT$6.01 billion.
TSMC SSL chairman Steven Tso (左大川) said the deal would create a “win-win scenario.”
Epistar has a better patent portfolio from cross-licensing with the world’s major LED companies, which include Philips and Toyoda Gosei, and has deployed a wide network of sales channels across the globe, the statement said.
“TSMC SSL’s capacity might be far less than Epistar, but by working with TSMC we can be introduced to different thinking, talent and systems from across industries to spark new ideas and improve Epistar’s future operations,” Epistar chairman Lee Biing-jye (李秉傑) said in the statement.
The acquisition of TSMC SSL is Epistar’s latest effort to boost its capacity and talent, in an attempt to capture the fast-growing LED lighting market over next three years, following a merger with rival Formosa Epitaxy Inc (璨圓光電) about a month ago, the statement said.
“The merger will significantly help Epistar shrink its learning curve in expanding to make large-size [LED] wafers and will also help the company migrate toward [advanced] wafer-level chip packaging technology,” Joanne Wu (吳盈潔), an analyst with market research house LEDinside, said yesterday.
The deal will also help boost Epistar’s LED chip capacity, Wu said.
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