Taiwan-based Lite-On Technology will team up with China's Tsinghua Unigroup to jointly develop the China market for storage products such as solid state drives (SSD), with the latter to invest US$55 million in the former's new subsidiary in Suzhou in a cooperative capital expansion pact signed December 12, according to a statement issued by Lite-On.

The statement came less than three months after Lite-On announced on September 28 that it would invest US$45 million to set up a wholly-owned subsidiary and build a storage manufacturing plant in Suzhou, Jiangsu province of China. Tsinghua Unigroup and Lite-On had held talks on jointly setting up a storage business for more than six months before Lite-On's September announcement.

Under the cooperation pact, the registered capital of Lite-On's Suzhou subsidiary will be expanded to US$100 million, and Tsinghua Unigroup will hold a 55% stake in the joint venture with three seats on its board of directors, compared to Lite-On's 45% and two board seats. The new venture will be managed under a co-CEO mechanism, with both sides each proposing a candidate.

The pact will remain valid for 20 years starting after the Suzhou subsidiary gets an official operating license. During the period, Tsinghua Unigroup will handle marketing and customer relations by utilizing its connections in China, while Lie-On is to take charge of supply chains and contract manufacturing.

Construction of the new plant will kick off in early 2018, and official run is slated for fourth-quarter 2018. Lite-On expects the new Suzhou venture to start contributing to its revenues in 2019 at the earliest.

Lite-On has been engaged in the development and sales of storage devices for PCs, enterprise servers and datacenters for 10 years, with Lenovo, HPI and Dell among its global customers. The company is confident that its cooperation with Tsinghua Unigroup will create significant synergies and better cash in on the growing storage market demand in China.

Industry sources said this is Tsinghua Unigroup's second investment involving Taiwan companies in the past two months. Taiwan-based IC packager Siliconware Precision Industries (SPIL) announced on November 24 that it has sold a 30% stake of its subsidiary, also in Suzhou, to Tsinghua Unigroup for CNY 1.02 billion (US$154 million) to facilitate its development in the China market.

By: DocMemory
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