Loss-making Singaporean MBE subsidiary to become greater focus of Asian growth strategies
Advanced wafer company IQE plc has announced the acquisition of third-party shareholdings in its CSDC joint venture in Singapore taking its ownership to 100 percent.
CSDC was formed in March 2015 as a joint venture between IQE’s Singaporean subsidiary MBE Technology (51 percent), WIN Semiconductors (25 percent), Nanyang Technological University (18 percent) and individuals of the NanYang University (6 percent).
It was established as a vehicle for the development and commercialisation of compound semiconductor technologies for academic and industrial customers based on MBE technologies in Asia.
Since formation, the geo-political landscape has changed significantly. During 2019 in particular, the localisation of Asian technology supply chains is rapidly becoming evident and significant opportunities are emerging for the China 5G market.
Drew Nelson, CEO of IQE, said: “Singapore represents a strategically significant site for IQE. The capabilities of the CSDC team and skills availability in that location, coupled with proximity to Asian chip customers and OEMs, provide a strong opportunity to contribute to IQE’s global growth opportunities. With 100 percent control, IQE will be best positioned to address the current financial position and secure the strategic direction of the operation.”
By taking the operation under 100 percent ownership, IQE says it is best placed to take the necessary steps to restructure the operation which is currently loss-making as a result of under-utilisation of assets and property lease obligations; and pursue Asian market sales opportunities for MBE-based products to return the operation to profitability.
Revenue recognised by IQE and its Singaporean subsidiary will be unaffected by the transaction. It is anticipated that post acquisition adjusted EBITDA and adjusted Operating Profit in the consolidated accounts for FY19 will be adversely affected by c.£0.5m.
The acquisition is for a nominal fee of USD$1 to WIN Semiconductors and SGD$1 to each of the other third party shareholders, to be settled in cash. The non-cash balance sheet impacts will be finalised as part of the completion of acquisition accounting for the shareholdings.
For the year ended 31 December 2018, CSDC recorded net losses of SGD$8.9m. The net liabilities attributable to CSDC as at 31 December 2018 were SGD$15.4m.
Drew Nelson will remain as a director of CSDC and LG Yeap, general manager for MBE Technology, will become a director of CSDC.
The acquisition constitutes a related party transaction under AIM Rule 13 by virtue of WIN Semiconductors and Nanyang Technological University being substantial shareholders in CSDC hence they are related parties under the AIM Rules.
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