April 2016: Taiwan Business in Brief

FAMILY FEUD — Business goes on at EVA Air despite the power struggle among half-brothers for control of the Evergreen Group. (Photo: CNA)
FAMILY FEUD — Business goes on at EVA Air despite the power struggle among half-brothers for control of the Evergreen Group. (Photo: CNA)

Taiwan Super Rich now Fewer, and Poorer

The economic slowdown in China is hitting Taiwan’s wealthiest where it hurts: their net worth. According to the Forbes list of 1,810 billionaires worldwide, Tsai Eng-meng, chairman of WantWant foods conglomerate, and Hon Hai Precision’s Terry Gou retained their positions as Taiwan’s first and second wealthiest, respectively. But both saw declines in their net worth, attributed to the slowdown in China, where both have massive business interests. Tsai’s wealth declined nearly 30%, from US$8.9 billion in 2015 to US$6 billion this year, while Gou’s wealth dropped from US$6.1 billion in 2015 to US$5.6 billion. Tsai’s global ranking dropped from 147 in 2015 to 201 this year, but Gou’s actually rose, from 240 to 228.

Taiwan posted only 25 billionaires this year, compared to 38 last year. Housing developers were prominent among Taiwan’s entries on the 2016 list, with Lin Yu-lin of the Hong Tai Group in third place (#270 globally) with a fortune of US$5 billion and T.Y. Tsai of Homax Equity in ninth (#906 globally) with US$2 billion. In the IT sector, Hon Hai’s Gou was joined by Barry Lam of notebook computer maker Quanta, in fourth place in Taiwan (#549 globally) with US$3.1 billion, and Pierre T.M. Chen, chairman of electronics component maker Yageo Corp. at number 10 (959 globally) with US$1.9 billion.

Others in the top 10 included Luo Jye of Cheng Shin Rubber Industry Co. at fifth place (569 on the global scale) worth US$3 billion, followed by Samuel Yin, head of conglomerate Ruentex Group (666 globally), with a fortune of US$2.6 billion. Brothers Daniel (chairman) and Richard (vice chairman) of Fubon Financial tied for seventh (722 globally) with a fortune of US$2.4 billion each.

Micron Now Biggest Foreign Investor

At an AmCham Taipei special Global Executive Insights luncheon March 10, U.S. memory manufacturer Micron Technology’s CEO Mark Durcan announced that Micron would soon complete its takeover of Taiwanese DRAM maker Inotera. Micron already owns a substantial share of Inotera as part of a joint venture with the Formosa Plastics Group’s Nanya Technology, and will soon purchase the remaining stake at US$4 billion dollars. That will bring Micron’s overall investment in Taiwan since 2008 to a total of US$12 billion, making Micron the largest foreign direct investor in Taiwan. Micron is one of the world’s biggest manufacturers of memory products, and makes some 60% of its DRAM in Taiwan. Durcan cited a high-quality talent pool, business-friendly regulatory environment, strong technology manufacturing ecosystem, proximity to large markets such as China, and affordable energy costs as Taiwan’s key advantages for Micron.

Hon Hai to Complete SHARP Acquisition Deal

Hon Hai Precision Industry on March 30 announced completion of a long-negotiated deal under which it will acquire a majority stake in Japanese electronics maker Sharp. Although Sharp has performed poorly in recent years, Hon Hai is expected to benefit from its valuable technologies and also gains an internationally known brand name for consumer products. Hon Hai Vice Chairman Dai Cheng-wu told reporters that Hon Hai would invest NT$111.44 billion (US$3.46 billion) for a 66% stake in Sharp.

Under the agreement, Hon Hai is to directly acquire 44.55% of Sharp, its subsidiary Foxconn Technology (the world’s biggest assembler of iPhones and iPads for Apple) is to hold another 13%, and Terry Gou, Hon Hai’s founder and chairman, is to personally own an additional 8.45% stake. The NT$25.18 per share that Hon Hai will pay for Sharp is 25% below an earlier offer in February that was withdrawn after Hon Hai learned of previously undisclosed liabilities at Sharp. Hon Hai, which reported record net earnings of NT$146.86 billion (US$4.56 billion) in 2015 on better product mix and strong demand for consumer electronics, said that it would pay cash for the deal, which is the first foreign acquisition of a major Japanese electronics company.

Evergreen Inheritance Dispute Continues

Chang Kuo-wei, son of the late Evergreen Group founder Chang Yung-fa and his second wife, resigned from the EVA Air board on March 27 and appointed a lawyer surrogate in his place. Chang has been at the center of a bitter dispute with his three half-brothers, the sons of Chang Yung-fa’s first wife, for control of the late tycoon’s shipping and transportation empire. After their father’s passing, Chang’s half-brothers booted him from his role as chairman of the Evergreen Group and as head of EVA Air, although they were unable to remove him from his separate role on the EVA Air board, representing private company Huaguang’s stake in the airline.

OBI, Academia Sinica Head Face Pharma Scandal

OBI Pharmaceutical, once the darling of Taiwan’s budding biotech sector, has recently faced a slew of bad news. Share prices traded at NT$681 as recently as the end of the February, before news of the disappointing results of OBI’s breast cancer drug in clinical trials led to a rout in the share price. More recently, the company has been embroiled in a conflict-of-interest scandal involving Wong Chi-huey, president of national research institute Academia Sinica, who had made favorable public statements about the drug during its testing phase. It later became known that Wong’s daughter was one OBI’s 10 largest shareholders. As of March 30, OBI shares were trading at NT$358.