Largan expected to rake in royalties on legal victory over Samsung

Taiwan-based Largan Precision Co. (???), a smartphone camera lens supplier to Apple Inc., is expected to rake in royalties to boost its bottom line after an intellectual property rights litigation victory over Samsung Electronics Co. of South Korea, according to market analysts.

In November 2013, Largan filed a lawsuit in California, accusing Samsung of infringing on six of its patents covering camera lens design when the South Korean electronics giant rolled out its Galaxy Note and S series phones.

After three years of a legal battle, Largan announced earlier this week that it and Samsung signed a settlement agreement in October to terminate the litigation, but both sides cited a non-disclosure agreement, declining to reveal any details about the settlement.

However, Largan did not reject market speculation that it will receive royalties from Samsung over the patent infringement settlement, which has bolstered market analysts' belief that the Taiwanese firm will witness its profitability strengthening from the royalty payment.

In addition, analysts said that the settlement agreement could also involve Samsung's consent to place orders with Largan. The assumption has arisen since Largan said that it is possible for both sides to cooperate with each other in the smartphone business after they settled out of court.

Currently, Apple is the largest client of Largan, accounting for more than 40 percent of the Taiwanese manufacturer's total revenue. Since Apple tends to unveil its new iPhone models in the second half of a year, Samsung's orders are expected to help Largan make better use of its production capacity in the first half of the year, analysts said.

If Largan receives orders from Samsung, its position as the largest smartphone camera lens supplier in the world will be further strengthened and it will not be easy for rivals to challenge its lead, analysts added.

Largan's new production plant with more than NT$20 billion (US$627 million) in investments is scheduled to launch commercial production in the third quarter of next year, which is expected to handle the orders placed by Samsung, analysts said.

Meanwhile, Largan also reached a settlement to terminate a lawsuit in July with smaller Taiwanese rival Genius Electronic Optical Co. (???). In the lawsuit, Largan had accused Genius Electronic Optical of infringing on its five patents related to smartphone camera lens production. Analysts said that the settlement could bring in additional royalties revenue for Largan.

In a research note, a foreign brokerage said that due to the patent settlement with Samsung and an increase in usage of dual camera lenses by international smartphone makers, Largan shares have appeared more attractive.

The brokerage said that it has issued a target price of NT$4,460 on Largan shares and recommended a "buy" on the stock.

On Friday, Largan's stock price fell 1.10 percent to end at NT$3,610.00 on the local main board after a 1.36 percent decline on the tech-heavy Nasdaq in the U.S. Thursday.

Source: Focus Taiwan News Channel