The shrinking market share of Apple and Samsung in the smartphone market is a critical indicator that the smartphone market is already past its zenith. At the same time, the number of middle and low-end consumer groups that can be tapped is also gradually diminishing.
Under this background, touch display panel manufacturers in the upstream of the smartphone supply chain link are stepping up to enhance their structure to meet future needs. On the one hand, they are actively expanding their original market share, while on the other hand, they are using mergers and acquisitions to consolidate their position.
*ST (002217.SZ) (hereinafter referred to as Holitech) is targeting the smart wearables market. On July 25th, Holitech announced that its subsidiary Jiangxi Holitech Technology Co., Ltd. has signed an equity transfer framework agreement with Taiwan Optic Technology Limited Liability Company with the plan to subscribe for 100% of the stocks of Optic Technology at a value of RMB80 million.
Optic Technology is a Taiwan-based company. Its main products are protective panels for mobile phones and smart wearables, and its main customers include HTC, GARMIN and TOMTOM. In the first half of this year, it had an operating revenue of RMB35.3471 million, and a net profit of RMB8.3328 million.
Holitech considers this overseas investment as an important part of the company's strategy in developing the smart wearables market structure. This investment will help promote Holitech’s competitiveness in the smart wearables market in terms of technology and customer resources.
“Smartphone usage continues to rise among global users, and the high-tech industry that follows Moore's law, is seeking the next high-explosive market. Smart wearables are setting off a technological revolution." Said Jin Bo, Vice President and Secretary of the Board of Directors of Holitech in an interview to Mobile News on August 4th. He believes that smart wearables are likely to become the “fourth platform” after TVs, computers and mobile phones, or even the “fourth gold mine”.
Jin Bo said that the advent of the smart wearables era means intelligent extension of human beings. We can process information more efficiently to realize more seamless communication. Outdoor sports fitness field and healthcare field will become the two main application domains for smart wearable products.
Holitech will continue to position itself as a solution kit provider for touch displays, providing customers with the three components – touch sensor, display and protective shell covering the surface after assembly into modules. It has started cooperating with internationally renowned brand manufacturers, some of which have entered mass production stage. Moreover, it is jointly developing and designing smart wearable products with well-known domestic customers. It has completed its product design and the products will soon enter the mass production stage.
In fact, this acquisition will not only enrich its own products in the smart wearables field, but will be essential in rapidly enhancing Holitech’s performance.
Related enterprises are faced with great operating pressure due to the rapid decline of gross margins for touchscreens in the traditional smartphone market as well as the slow-down in market growth. As Holitech bears the title *ST, it needs to expand more urgently through mergers and acquisitions.
In the process of Holitech’s acquisition of Optic Technology, the company anticipated that net profit will be not less than RMB14.56 million in 2014, a YoY increase of 107%; shall not be less than RMB18.72 million in 2015, a YoY increase of 28.57%; and shall not be less than RMB22.89 million in 2016, a YoY increase of 22.28%.
Holitech will make an initial payment of 70% of the total price, i.e., no more than RMB50 million, and the balance shall be paid based on negotiation between the two parties, in accordance with the operation of Optic Technology in the coming three years.