Stjernberg Automation: Swedish high technology absorbed by China

At Datenna, our China experts continuously track and conduct detailed investigations into the acquisitions of European and US firms by Chinese entities. Through a series of articles in our resource library, we highlight striking acquisition case studies, analysed based on Datenna's in-depth, unique data on China's techno-economic landscape. This article elaborates on the acquisition of the Swedish Stjernberg AB.

Short Read

Stjernberg Automation AB

Stjernberg Automation AB was established in Sweden in 2008 as a highly specialised laser equipment manufacturer and digital manufacturing provider. Due to its pioneering role in laser technologies, the company counted clients including Volvo, 3M, Tetra Pak, and Saab, and was considered a technological leader in the European market. Beyond laser technology, the firm also provided services aimed at digitalising manufacturing processes. Its activities fell into the "high-tech manufacturing" category — an important area of development in both the "Industry 4.0" and "Made in China 2025" programmes, the main landmarks in China's long-term policy strategies to bring about the 4th industrialisation through the digitalisation of manufacturing and the enhancement of high-quality production.

Acquisition by State-Backed Tus Holdings

Given the appeal of the Swedish company's business scope, Stjernberg Automation AB was targeted by Chinese investors in 2017, when 66.6% of the company's stakes were acquired by Tus Holdings Co., Ltd. — transferring the majority share to the Chinese investor while leaving the original management unchanged.

The acquirer's main shareholder is Tsinghua University, a major public research university in China strongly tied to the state, which provides funds and development outlooks. Tus Holdings "takes full responsibility for developing, constructing, operating and managing Tsinghua University Science Park" — a key innovation and technology hub in China. Through this relationship, Tus Holdings is directly influenced by the Chinese state.

Exploring the Chinese Market

The acquisition from Tus Holdings appears to have triggered Stjernberg Automation AB's explorative journey into the Chinese market. First, the Swedish company established a wholly foreign-owned enterprise in China named Shanghai Rui Huan Technology Co., Ltd. Shortly after, Ningbo Huanbei Automation Co., Ltd. was established, fully controlled by Stjernberg through a Hong Kong-based subsidiary, Stjernberg Group Limited. The Swedish company was also involved in a joint venture with two local entities, both operating in the field of smart manufacturing.

Changes in the Board and Bankruptcy

The main investment of note was made into Zhejiang Huanbei Laser Technology Co., Ltd. — engaged in laser technology, robotics, and technology development, with a registered capital of €6.5 million. Originally established as a Sino-foreign joint limited liability company owned by Stjernberg and a local Chinese partner, from 2019 it became a limited liability company funded solely by a Chinese stakeholder. The General and Vice Manager of Zhejiang Huanbei Laser Technology was Jan Magnus Stjernberg, also a director of the Swedish parent. In 2021, the entire management was replaced with local Chinese staff — completely erasing Swedish influence from the board of directors. At the same time, the company's business scope was changed from "engineering and technical research and experimental development" to "other technical promotion services."

The removal of the Swedish directors does not necessarily imply that the technology within the joint venture was not absorbed by Chinese actors. These changes in management and business scope are aligned with Stjernberg Automation's bankruptcy in 2019. Since the 2017 acquisition, the firm's financial performance had been shrinking — with a decrease in production value of 8% and a negative EBIT of almost €1 million in 2019, the year the company went bankrupt.

The Risk of Unwanted Technology Transfer

The 2017 acquisition affected the parent company's operations while marking the start of its exploration of the Chinese market through joint venture establishment. The EU-level framework for investment screening should enhance and better coordinate FDI screening practices at the national level. Nevertheless, the responsibility for conducting thorough screening procedures to prevent sensitive technology from leaving the EU still lies with national FDI screening units. The Stjernberg case study illustrates the urgent need for discussion on unnoticed technology transfer to China.