Hwa Sheng Co. sells its Chinese subsidiary's shares and reinvests in Taiwan to invest in new businesses to mitigate risks from US-China tariffs.

Taiwan • Business • 04/27 14:00
Hwa Sheng Co. sells its Chinese subsidiary's shares and reinvests in Taiwan to invest in new businesses to mitigate risks from US-China tariffs.

Hwa Sheng (stock code: 3202) announced on April 27, 2025, the sale of a 37.04% stake in its Chinese subsidiary, High-Tek Harness Enterprise Co., Ltd. (SAMOA), to recover $10 million to accelerate investments back in Taiwan. The company plans to invest in areas such as organic waste recycling, urban-rural development, and agricultural innovation initiatives, while also improving its financial structure to address challenges posed by the US-China tariff war and avoid the risk of being delisted from the stock exchange.

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Hwa Sheng Co. sells its Chinese subsidiary's shares and reinvests in Taiwan to invest in new businesses to mitigate risks from US-China tariffs.

Hwa Sheng (stock code: 3202) announced on April 27, 2025, the sale of a 37.04% stake in its Chinese subsidiary, High-Tek Harness Enterprise Co., Ltd. (SAMOA), to recover $10 million to accelerate investments back in Taiwan. The company plans to invest in areas such as organic waste recycling, urban-rural development, and agricultural innovation initiatives, while also improving its financial structure to address challenges posed by the US-China tariff war and avoid the risk of being delisted from the stock exchange.

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Selling Shares of Chinese Subsidiary to Mitigate US-China Tariff Risks

At a press conference, Hua Sheng Electronics Co., Ltd. stated that considering the continuous increase in tariffs between the US and China, which has significantly impacted the company's investments and export business in China, it has decided to accelerate the sale of shares in its Chinese subsidiary, High-Tek (SAMOA). After selling 37.04% of the shares, Hua Sheng, along with another subsidiary, High-Tek (BVI), will still hold a 19% stake in the Chinese business.

Hua Sheng's electronics division has mainly operated in China, with revenue consistently making up 80% to 90% of the total over the years. Since the shareholders approved the phased disposal plan in 2017, the company has been executing it in stages since 2019, culminating in this significant share transfer. Hua Sheng stated that this move is not only a response to the risks brought by the US-China trade war but also aligns with the Taiwanese government's policy encouraging Taiwanese businesses to return.

Developing New Business Layout in Taiwan

Hua Sheng plans to invest the $10 million recovered from this sale into new businesses in Taiwan, focusing on three key areas:

Organic Waste Reuse

Hua Sheng noted that with Taiwan's Environmental Protection Administration set to fully regulate waste starting in 2025, the demand for organic waste treatment and reuse is increasing. The company completed the construction of an organic waste reuse facility in Sanxia on March 17, 2025, and officially commenced operations. The facility has a maximum daily processing capacity of 300 metric tons, making it the largest single-day processing capacity organic waste reuse facility in Taiwan. Hua Sheng plans to leverage its partners' technological advantages to capture market share and establish this as a significant milestone in Taiwan's organic waste reuse sector.

Urban-Rural Development and Agricultural Innovation

In terms of urban-rural development and agricultural innovation, Hua Sheng is responding to the government's urban renewal and reconstruction plans for old and dangerous buildings, aiming to develop sustainable and healthy housing to meet the residential needs of the industrial population following the return of Taiwanese businesses. The company plans to incorporate technology and smart elements into new urban-rural constructions to promote the development of smart livable communities.

ESG and Green Energy Industry Integration Platform

Hua Sheng has proposed the "Hua Sheng 4.0" plan, centered on ESG (Environmental, Social, and Corporate Governance), to develop a new type of industry integration platform focused on green energy. The company will establish a complete ESG4.0 ecosystem through industry chain, value chain, supply chain management, quality control, and blockchain technology, promoting industry-academia collaboration, cultivating cross-disciplinary talent, and expanding global ESG industry cooperation.

Actively Improving Financial Structure to Avoid Delisting Risk

The sale of High-Tek (SAMOA) shares by Hua Sheng is not only to reinvest in new businesses but also to improve the company's financial structure. The company faces the risk of delisting according to the OTC market's business rules Article 15-11 due to its failure to submit financial reports on time. According to the regulations, if consolidated revenue declines by more than 50%, the company may be disqualified from listing.

Hua Sheng stated that after disposing of the Chinese subsidiary shares, it will actively rectify the financial reports and has already begun discussions with accountants, with the goal of completing the financial report rectification within six months to avoid delisting. The company also emphasized that it will offset the decline in revenue from the electronics division through the growth of new business units, particularly the organic waste reuse business, to maintain overall operational stability.

Additionally, Hua Sheng pointed out that the original plan to transfer High-Tek (SAMOA) shares was scheduled for completion by the end of 2027, but due to the current financial situation and US-China tariff risks, it decided to speed up the disposal to ensure capital return and optimize the financial structure.

References

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