LightPath Technologies has entered into a joint venture agreement with CDGM Glass Co.
LightPath and CDGM will each own a 50 per cent interest in the joint venture which will run under the name ‘LightPath CDGM Chengdu Optical’ and be located in Chengdu, China.
The initial capital contribution of each party to the joint venture will be a cash investment equivalent to $5m. CDGM is owned by China South Industries Group Corp., a state owned enterprise.
The joint venture will develop, mould, and manufacture aspheric lenses with a diameter of less than 20mm 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 such applications.
The target production volume is one million lenses per month which can be achieved after 12 months of manufacturing.
If LightPath and CDGM agree, the joint venture’s production capacity can be expanded with additional investment of $5m from each of the joint venture partners.
The market demand for cell phones and digital cameras is about 700 million lenses per year, according to study The Development of Camera Phone Module Industry, 2005-2006 by Beijing RIC Consulting. The study found that the number of phones and cameras that use greater than three mega pixel resolutions is about 10 per cent of the market.
LightPath believes that aspheric lenses above the three 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 is providing the following elements to the joint venture:
- 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 LightPath of approximately $4.5m.
- LightPath has agreed to license certain of its technology to the joint venture for which it will receive a 3 per cent royalty based upon sales by the joint venture.
- Joe Wu, LightPath’s executive vice president, has been appointed as the general manager of the joint venture with responsibility over the day-to-day operations of the joint venture.
LightPath intends to consolidate the joint venture for financial statement purposes since LightPath 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. LightPath and CDGM have commenced transitional efforts and expect the joint venture to be operational by no later than 1 July 2008.