News & Event

2020/4/9

The Board of Directors of Silitech Technology Corp. resolves the subsidiary, Xurong, to gradually reduce the production in its factory and the factory will be closed in accordance with the laws

(2020/04/09) Silitech Technology Corp. (TWSE: 3311) Board of Directors approved the Company's subsidiary, Xurong Electronic (ShenZhen) Co., Ltd. (hereinafter referred to as "Xurong"), which manufactures the mechanical integration components, will gradually reduce the production in its factory. After the existing orders have been fulfilled, the factory will be closed in accordance with the laws of the local country. The equipment and assets of Xurong will be assessed for impairment losses in accordance with International Financial Reporting Standards IAS36 and the layoff expenses will be estimated. The total losses will be approximately NT$ 363 million, which is expected to affect the Company's EPS approximately NT$ 6.05 in the first quarter of 2020. The actual amount is subject to be reviewed by CPA.
 
The Company invested in Xurong at the end of 1999 and experienced a prosperous period of feature phones. At that time, it was profitable because of its specialization in the mobile phone keypads. Due to the popularity of touch-controlled smartphones since 2013, demand for mobile phone keypads has been on a gradual decline. In response, the Company has turned to cross-industry applications. In addition to maintaining traditional mobile phone keypads and gaming console products, Xurong also developed new cross-industry applications such as smart lock modules, 3D glass car keys, toys, and netcom optical mechanism components. Although the technology, quality and service have been affirmed by customers, the decline of mobile phone keypads cannot be compensated, so Xurong has suffered losses in recent years; and the COVID-19 pandemic has caused a significant decline in orders in this year, and due to the expiration of factory leases, rental increases too high, the expected operating synergy cannot be achieved. In order to ensure the effective use of resources, it is decided to stop loss that Xurong will gradually reduce the production of its factory. After the completion of existing orders, the factory will be closed in accordance with the laws of the local country.
 
Looking forward, the direction of the Company’s operation has applied to different industries and products which are divided into two categories: Mechanical Integration and Automotive Components. In Mechanical Integration: the Company has continuously developed new cross-industry applications such as the wearable industry and smart watch strap modules, smart lock modules, netcom components and optical mechanism module and other fields. In Automotive Components: in addition to solidly profitable automotive interior components, the Company also developed new technologies for interior mechanical components. Besides the capacity downsizing in mainland China plant and the capital reduction to adjust the capital structure last year, the implementation of this adjustment plan will relocate resources and expand investment in the new technology development and capacity expansion of the Taiwan plant and the Malaysia plant. It will strengthen the operation efficiency and the Company is going toward its profitable, not big but positive way.
 
Spokesperson: James Huang, President   TEL: 886-2-2623-2666
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