Florida-based LightPath Technologies, Inc. announced that on 8 January 2008 it entered into a joint venture agreement with CDGM Glass Co., Ltd. The two firms will each own a 50% interest in the joint …
Florida-based LightPath Technologies, Inc. announced that on 8 January 2008 it entered into a joint venture agreement with CDGM Glass Co., Ltd. The two firms will each own a 50% interest in the joint venture “LightPath CDGM Chengdu Optical Co., Ltd.” to be located in Chengdu, China. The initial capital contribution of each party to the joint venture will be a cash investment equivalent to USD 5 million. CDGM is owned by China South Industries Group Corp., a state owned enterprise. CDGM is China“s largest optical glass manufacturer producing preforms for optical companies to convert into optical lenses. The initial purpose of the joint venture is to develop, mold, and manufacture aspheric lenses with a diameter of less than 20 mm for high volume visible imaging applications for cell phones, digital cameras and video equipment. The joint venture may also assemble modules that will include the lenses for these applications. The joint venture will sell and distribute its products in China and international markets and will provide technical and after-sale services. The target production volume of the joint venture is one million lenses per month which the parties believe can be achieved after 12 months of manufacturing operations. If LightPath and CDGM agree, the joint venture“s production capacity can be expanded with additional investment of USD 5 million from each of the joint venture partners. Market demand from cell phones and digital cameras is for about 700 million lenses per year, according to a study, “The Development of Camera Phone Module Industry, 2005-2006” by Beijing RIC Consulting Co., Ltd., (C) 2007. The study says the number of phones and cameras that use greater than 3 mega pixel resolutions is about 10% of the market. LightPath believes that aspheric lenses above the 3 mega pixel ranges for cell phones, digital cameras and other equipment will significantly enhance the resolution and provide the potential for future functional enhancements in such equipment and will replace the mixed plastic and glass lenses currently used for such applications. LightPath and CDGM have unique technologies and capabilities which they believe, when integrated, can provide excellent solutions for the requirements of the market. LightPath is providing several key elements that are integral to the operation of the joint venture. Firstly, LightPath has agreed to produce Viper presses which will be sold to the joint venture. LightPath anticipates that production of the presses will require an additional investment by itself of approximately USD 4.5 million. Secondly, LightPath has agreed to license certain of its technology to the joint venture for which it will receive a 3% royalty based on sales by the joint venture. Joe Wu, LightPath“s executive vice president, has been appointed as general manager of the joint venture with responsibility for the day- to-day operations. LightPath intends to consolidate the joint venture for financial statement purposes since it has the right to appoint a majority of the members to the joint venture“s board of directors and CDGM does not have substantive participating rights. The joint venture agreement is subject to governmental approval in Chengdu, China. Subject to the parties meeting the capital investment requirements of the joint venture agreement, the joint venture will be established and commence operations upon satisfaction of all licensing requirements and the Chengdu Municipal Administration Bureau for Industry and Commerce has issued a business license for the venture. LightPath and CDGM have commenced transitional efforts and expect the joint venture to be operational by no later than 1 July 2008. Mr. Robert Ripp, chairman of LightPath“s Board of Directors, said: “For LightPath, the joint venture represents a major step of the strategy shift that we have been implementing. We have been making investments to allow LightPath to compete in the high volume, low cost lens market. We believed that the way for LightPath to execute its transformational strategy in the “consumer market“ for optical lenses was to partner with a major material supplier like CDGM to reduce the execution risk of that strategy. We are confident that with the combined resources of LightPath and CDGM the joint venture will be able to design and deliver high volume, low cost lenses that will be differentiated from and competitively priced with current mixed lens applications”.