Last week, Plano, Texas-based Diodes Incorporated announced plans to buy Taiwanese component maker Lite-On Semiconductor Corporation. Diodes intends to acquire Lite-On for $428 million in cash. The American concern will buy out its new subsidiary for $1.37 per share, a premium of 35 percent. Pending shareholder and regulatory approval, the transaction will close in April 2020.
In a press release, Diodes’ CEO Dr. Keh-Shew Lu said his firm is buying Lite-On to meet its long-term business objectives. By 2025, the firm intends to gross $2.5 billion annually with profits of $1 billion. The executive explained purchasing the Sino firm will help his company achieve that goal thanks to its Chinese contracts and range of products, which complement Diodes’ own offerings.
The 60-year-old Diodes is one of the world’s leading analog, discrete, logic, and mixed-signal semiconductor manufacturers. Conversely, the 29-year-old Lite-On specializes in producing green environmentally friendly power-related discrete and analog components.
Dr. Lu also said Lite-On’s contact image sensor (CIS) business would help expand the Texas corporation’s presence in the component industry. It will also help the firm bolster its revenues by giving it access to a lucrative new sector. According to Micromarket Monitor, the American CIS market alone is worth $1.16 billion.
The transaction also helped Diodes consolidate its ownership, As of June 2019, Lite-On owned 15.3 percent of its soon-to-be parent company.
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Diodes is also interested in taking advantage of Lite-On’s wafer fabrication and assembly facilities. The Sino semiconductor firm maintains manufacturing operations in Keelung and Hsinchu, Taiwan as well as Shanghai, China.
With President Trump’s recent threat to issue new levies on imported Chinese goods, Diodes could use a more diverse supply line. Indeed, leading semiconductor firms like Micron, Qualcomm, and Western Digital saw their stock prices fall following Washington’s trade war escalation. Currently, Diodes is in a similar position to those companies as all but four of its production, assembly, and testing facilities are in China’s mainland.
Thanks to its new acquisition, Diodes is in a better position to handle the financial implications of ever-changing Sino-American trade relations.