KUALA LUMPUR (Aug 4): The recent acquisition of Netherlands-based Lumileds by semiconductor manufacturer Inari Amertron Bhd (KL:INARI) and China’s Sanan Optoelectronics Co Ltd could position Inari as the preferred outsourced semiconductor assembly and test (OSAT) vendor for Lumileds/Sanan under the China Plus One strategy, according to RHB Investment.
The move also opens up long-term captive business opportunities by leveraging Sanan’s expertise in advanced packaging, silicon carbide (SiC), gallium nitride (GaN), and LED technologies.
Inari’s investment in this associate stake is estimated at RM307 million, funded via its 2021 placement proceeds, it added.
“With strong operational synergies and complementary technical capabilities, we expect resource reallocation and cost optimisation post-deal, potentially turning around Lumileds (earnings-accretive by 2027F or 2028F),” said RHB in a note on Monday.
If Lumileds’ losses are halved, RHB said Inari’s financial year 2027 earnings should improve by approximately 8% for the nine-month period.
The research house also noted that Lumileds’ US$239 million (RM1 billion) valuation was derived using a “willing-buyer, willing-seller” basis, referencing its net assets and estimated market value. The final price will be subject to adjustments for net cash, debt, and working capital.
RHB maintains its “buy” call on Inari, pending the completion of the Lumileds’ acquisition, with a target price of RM2.45.
Hong Leong Investment Bank (HLIB) viewed the acquisition positively for Inari’s OSAT segment, offering potential volume growth and customer diversification.
Risks of exposure to the competitive LED market
However, it flagged possible investor concerns about Inari’s indirect exposure to the competitive LED market via its 26% stake in Lumileds.
Despite these concerns, HLIB believes the risk is mitigated by Sanan’s involvement as China’s largest LED chipmaker and the lead partner in the deal.
A combined Sanan-Lumileds entity could emerge as a more competitive global player, rivalling firms like Nichia, Epistar, and Osram.
HLIB also suggested that Sanan’s move may signal an intention to diversify manufacturing operations beyond China, as Lumileds owns production assets in Singapore and Malaysia.
This geographic footprint could benefit the partnership under the evolving global supply chain landscape.
It maintains a “hold” call on Inari with a target price of RM2.10, based on a fair price-to-earnings valuation and Inari’s solid net cash position.
Nonetheless, limited short-term catalysts persist, with flat radio frequency (RF) content growth into 2H2025 and a key customer supply agreement expiring in mid-2026, which could introduce price volatility.
Inari closed the trading day at RM1.99, down 6.6% or 14 sen. This gave it a market capitalisation of RM7.54 billion.