CONSUMER electronic component manufacturer CDW Holdings, in the first step towards developing a new biotech business, has acquired eight intellectual property rights with a Japanese research and development firm for 100 million yen (S$1.35 million) in cash.
This will give the firm manufacturing and selling rights to products developed from research once patents are granted. The products can be used in the nutri-cosmetics and dietary supplement industries.
CDW on Tuesday entered into an intellectual property rights assignment agreement with Meisterbio Limited, which does R&D and sells bioactive compounds for health food and cosmetic applications.
CDW chairman and chief executive Koichi Urano said that the firm has been looking for diversification opportunities for a while now as its traditional business has been affected by rapid technology changes, shorter product life cycles and a weak global business environment.
"We have been identifying businesses with a potential for growth to invest in," he said. "The recent difficulties faced by our key Japanese customer underscore the importance and urgency of these efforts and our long-term aim is to create new engines of growth."
The eight intellectual property rights relate to Pterostilbene Glycoside, a functional organic compound which are said to have anti-oxidant, anti-ageing and hair growth benefits.
The key constituent, Pterostilbene, is a compound produced by small berry plants such as blueberries, cranberries, lingonberries and grapes that is said to help ward off the damage of pathogens such as bacteria or fungi.
CDW hopes to develop a new biotech business which will manufacture, market and sell Pterostilbene Glycoside as a raw material to shampoo, cosmetics and supplement manufacturers in Japan and overseas.
For the first half of the year, CDW's net profit shrank 99 per cent to US$75,000 on the back of a fall in revenue and other operating income.
Half-year revenue slipped 24 per cent to US$49 million as slowing global demand for smartphones led to a drop in orders from the group's key customer in the high-end smartphone market, especially for LCD backlight units.
CDW also recorded only US$466,000 in other operating income, down 92 per cent from the year-ago's US$5.7 million, which included a US$4.9 million exchange gain from the disposal of a subsidiary.
"The industry is highly competitive and volatile with rapid changes in technology and short product life cycles," CDW said.
To compete with low-cost Chinese companies, the group said it has restructured its operations and deployed more efficient production equipment and processes. It also expects order volumes to improve when the global economy recovers.
The counter last traded at 13.7 Singapore cents on Monday.