Joint venture: Fiberhome Supermicro
Datenna continuously tracks and conducts research on China-EU joint ventures in Europe. In this series of articles, we have decided to highlight our research and data on interesting joint venture cases. This article analyses the joint venture, Fiberhome Supermicro, set up between Fiberhome Telecommunications and the American-Dutch Supermicro B.V.
- The joint venture, Fiberhome Supermicro Information Technologies Co., Ltd. is a collaboration between the Dutch branch of the American company Supermicro, and the Chinese company Fiberhome.
- The joint venture is active in strategic sectors including information technology and telecommunications.
- Fiberhome has been blacklisted by the U.S. Commerce Department’s Bureau of Industry and Security but is still doing business with the American Supermicro via its joint venture.
Who are the parent companies?
Supermicro Computer B.V.
Supermicro is a technology company founded and headquartered in the USA. It mainly deals in server technology and innovation, develops and provides end-to-end green computing solutions to the data center, cloud computing, enterprise IT, big data, and HPC industries. In 2018, it was ranked as the 3rd largest server systems supplier in the world by IDC. The company has many branches in Asia and Europe; one of them, Supermicro B.V., is located in ’s-Hertogenbosch (The Netherlands) and mainly deals with servers sales.
Fiberhome Telecommunication Technologies Co., Ltd.
Fiberhome Telecommunication technology is a Chinese company, based in Wuhan and founded in 1999. It is a provider of information and communication network products and solutions. At present, Fiberhome Communications is ranked among the top ten most competitive companies in global optical communications. The company appears to be highly influenced by the Chinese government as, through different ownership layers, it is ultimately owned by the State-owned Assets Supervision and Administration Commission of the State Council.
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Blacklisted by the U.S. Commerce Department
In May 2020, the U.S. Commerce Department’s Bureau of Industry and Security officially declared they would add Fiberhome to its Entity List of organisations subject to Export Administration Regulations governing exports and other transactions. As a result, U.S. companies are only allowed to do business with Fiberhome if they obtain a specific license, which is subject to a so-called presumption of denial, meaning such a licence is difficult to obtain.
The joint venture between Supermicro and Fiberhome
In 2016, Supermicro B.V. and Fiberhome started a joint venture, Fiberhome Supermicro. The company is active as an IT product and solutions provider for public entitites, telecommunications, security, transportation, finance, Internet, education, medical and other industries. The joint venture offers advantages to both of the mother companies. On the one hand, it facilitates Supermicro’s access to the Chinese market; on the other hand it grants Fiberhome an entryway to the technology and the know-how of the US company.
It must also be noted that, despite the joint venture seemingly protecting the interests of both Supermicro and Fiberhome, the ownership of the company is not equally divided: while Supermicro owns 30% of the shares, the Chinese counterpart owns the remaining 70%, resulting in a significantly higher decision making power over the jointly owned company. This is especially relevant after the recent amendment to Chinese company law that imposes a shift in decision-making within joint ventures from the board to the shareholders.
Moreover, due to the fact that Fiberhome has been blacklisted by the U.S. Bureau of Industry and Security, Supermicro is in theory supposed to stop selling products directly to the joint venture. However, the Dutch subsidiary continues to be an investor in the joint venture which continues to produce servers for Fiberhome. The decisions of the U.S. Commerce Department, then, mainly result in a ban on direct sales of products to Fiberhome but have no effect on the cooperation between the two companies.
The IT & Telecoms sector : strategic priorities for China
Since the companies involved are active in the strategic sector of IT and telecommunications, it is worth mentioning the political framework surrounding the development of this field in China. These fields are among the priority industries that China wants to expand with industrial policy plans like Made in China 2025 (MiC 2025). This is a strategic plan through which the country aims to become a global high-tech powerhouse. More specifically, the plan aims to advance China’s technological and industrial capabilities, reducing the country’s dependence on foreign technology. The main motivation for the creation of this plan has been China’s weakness in certain technological fields, leaving the nation highly dependent on foreign contries when it comes to accessing high-tech solutions.
Cases like the one analysed here constitute relevant examples of how the peculiar legal framework around joint ventures may present loopholes. As a result, joint ventures may constitute exceptions to laws such as blacklistings and may a means to avoid international sanctions or bypass export lists, allowing a sanctioned company to do business and acquire strategic knowledge.
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