Financial Analysts Weigh in on San’an Opto and Seoul Semiconductor Joint Venture

San’an Optoelectronics (San’an Opto) announced the joint venture with Seoul Semiconductor and Seoul Viosys (Viosys) on April 10th 2014. San’an Opto holds the largest share in the venture with 49 percent, investing around US $980,000. Seoul Semiconductor has a 25 percent share with US$ 500,000 investment, while Viosys holds 26 percent with a US$ 520,000 investment. The joint venture will cover areas including design, R&D, production, LED product sales, and provide related services. 

The announcement of the joint venture took off like wild fire, with security brokers working into the night to complete their reports on the cooperation.  

 “The company is the definition of the 21st century dream in China,” Ping An Insurance Electronics Analyst Lin Zhaotian. “This year marks an important milestone for San'an Opto as it becomes a leading high-tech Chinese company, and is a year with abound investment opportunities.” 

”I was once offered the opportunity to invest in San’an Optoelectronics when it had a market value of US $40 billion, but I passed up on it,” said Lin.“ I soon realized my mistake when the company’s market value jumped to US $80 billion.”

San’an Opto’s has already gained recognition for their chip quality and production ability from large LED international manufacturers. The company has an opportunity of becoming one of the few available options in the LED manufacturing industry. As top international companies focus on R&D, there is a chance companies might turn towards outsourcing parts of the manufacturing process to San'an Opto. 

GF Securities analyst Xu Xingjun shares a similar opinion. “There is a trend in large LED manufactures to outsource production,” remarked Xu. “Company size represents competitiveness.”  

As LED industry products become more affordable, market competition increasingly shifting towards production scale, said Xu. The joint venture between San’an Opto and Seoul Semiconductor represents international chip manufacturer’s shrinking chip production scale. With strength in both cost and size, San’an Opto still has room to grow. For the semiconductor industry, “company scale is an indicative of competitiveness”. For LED international manufactures with little strength in cost and technology, LED chip manufacturing outsourcing will be the future trend. Relying on costs, government policies, investments, and other strengths, Xu anticipates San’an Opto’s rise to the top. 

International companies see no problems with San’an Opto’s patents and do not question the company’s capabilities of entering the overseas market, said Guotai Junan Securities Analysis Shi Maoping. There are no regional boundaries to limit the globalized company. Domestically, San’an Opto’s has a secure position as a chip manufacturing leader. Competitors hope to be successful in the Korean market. 

Guotai Junan Securities conjectured in the second half of 2013, that if “China has enough government support, financing platforms, and fast technological innovation, then upstream chip manufacturers that have high cost and high technology barriers will be able to act as global OEMs.” San’an Opto has surpassed these expectations through their joint venture with Seoul Semiconductor. 

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