Dongshan Precision, a leading Chinese Printed Circuit Board (PCB) manufacturer, recently announced a ¥5.935 billion ($850 million) acquisition of Taiwan-based optical communications firm Source Photonics. However, Taiwan’s “Ministry of Economic Affairs” has stated that it has not yet received an application to modify Source Photonics’ investment plan and will conduct a rigorous review in conjunction with relevant authorities upon receipt.
In a filing on June 24th, Dongshan Precision outlined its strategy to expand its footprint in the optical communications sector and enhance its overall competitiveness. The company plans to acquire 100% of Source Photonics through its wholly-owned subsidiary, Hong Kong Technic, via a cash transaction.
The deal includes an upfront payment of up to $629 million for 100% of Source Photonics, with an additional $58 million allocated for the acquisition of employee stock options. To support its operational development and refinance convertible bonds issued to Shandong Wanda Terminal Development Co., Ltd. (600246), Dongshan Precision also intends to purchase up to ¥1 billion ($145 million) in convertible bonds issued by Source Photonics.
The total investment for this acquisition amounts to no more than ¥5.935 billion ($850 million). Upon completion, Source Photonics will become a wholly-owned subsidiary of Dongshan Precision.
Source Photonics is recognized as a frontrunner in the global optical communications module industry, leveraging a vertically integrated product line and an Integrated Device Manufacturer (IDM) model to build its competitive edge.
Its operations span the design and manufacturing of optical chips, optical component production, and the complete optical module process, showcasing robust, comprehensive R&D capabilities and vertical integration.
In terms of technological advancement and market positioning, the company has achieved large-scale production of high-speed optical modules like 400G and 800G, crucial for data centers. Its in-house optical chip development and manufacturing capabilities are particularly noteworthy, supported by a stable order backlog that continually solidifies its leading industry position.
Dongshan Precision anticipates that this strategic integration will spearhead a significant upgrade in its business structure, fostering synergistic development across its core segments including consumer electronics, new energy vehicles, and optical communications. This move is poised to unlock new avenues for growth through technological convergence and market expansion.
During an investor event on July 1st, Dongshan Precision indicated its target to complete the acquisition of Source Photonics within the third quarter of the current year, with all parties actively working on necessary approvals to expedite the closing process.
In response, Taiwan’s Ministry of Economic Affairs issued a statement on July 2nd, highlighting that it has been monitoring Source Photonics’ activities since its mainland Chinese ownership was established in 2016, in accordance with relevant regulations for mainland investments. The Ministry confirmed it has not yet received an application to alter Source Photonics’ investment plan and has officially notified the company that the acquisition necessitates an investment plan amendment, requiring prior approval from the Ministry under mainland investment regulations.
The Ministry further clarified that upon receiving the application, it will conduct a thorough review with relevant authorities, assessing factors such as national security implications and potential adverse impacts on industrial development, all in strict adherence to cross-strait regulations and mainland investment approval mechanisms.
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