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, was a highly specialized Swedish laser equipment manufacturer and digital manufacturing provider established in 2008.
- In 2017, 66.6% of the company’s equity was acquired by the Chinese state-backed company Tus Holding. Since then, the Swedish firm established different entities throughout China, including both wholly-owned companies and joint ventures. Through intricate ownership structures, these entities are linked to the Chinese central government.
- Shortly after the takeover, Stjernberg Automation AB filed for bankruptcy, indicating that the company’s economic performance didn’t benefit from Tus Holding’s purchase of its majority share. This suggests potential motives of technology absorption behind the acquisition.
Stjernberg Automation AB
Stjernberg’s activities fell into the “high-tech manufacturing” category, a critical area in China’s strategic development plans and industrial policy.
Stjernberg Automation AB was established in Sweden in 2008, as a highly specialized laser equipment manufacturer and a digital manufacturing provider. Due to its pioneering role in laser technologies, the company could boast clients like Volvo, 3M, Tetra Pak, and Saab, and was considered to be a technological leader in the European market. Far from merely focusing on laser technology, the firm also provided its customers with services aimed at digitalizing manufacturing processes. Through its management of cutting-edge technology, the firm’s activities fell into the “high-tech manufacturing” category, an important area of development both in the “Industry 4.0” and “Made in China 2025” programs. These two are the main landmarks in China’s long term policy strategies which seek to bring about the so-called “4th industrialization” through the digitalization of manufacturing processes, and the enhancement of high-quality production.
Acquisition by state-backed Tus Holdings
Given the appeal of the Swedish company’s scope of business, 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. This acquisition resulted in the transfer of the company’s majority share to the Chinese investor. However, at the time, the company’s original management remained unchanged.
The acquirer’s main shareholder is Tsinghua University, a major public research university in China. The academic institution is strongly tied to the state, which provides funds and development outlooks. In the company description it can be seen that Tus Holdings “takes full responsibility for developing, constructing, operating and managing Tsinghua University Science Park,” a relevant innovation and technology hub in China. Through its main stakeholder, Tus Holdings is directly influenced by the Chinese state.
Exploring the Chinese Market
The acquisition from Tus Holding seems to have been the trigger for the Swedish company explorative journey into the Chinese market. Firstly, Stjernberg Automation AB established a wholly foreign-owned enterprise in China, named Shanghai Rui Huan Technology Co., Ltd. Soon after, a company called Ningbo Huanbei Automation Co., Ltd. was also established, which was fully controlled by Stjernberg through a Hong Kong-based subsidiary called 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 the company Zhejiang Huanbei Laser Technology Co., Ltd., which is engaged in laser technology, robotics, technology development, and with a registered capital of €6.5 million. Originally, the firm was established as a Sino-foreign joint limited liability company, owned both by Stjernberg and a local Chinese partner. From 2019 it became a limited liability company funded solely by a Chinese stakeholder. Diving deeper into the original management structure of the company, we see that the General and Vice Manager of Zhejiang Huanbei Laser Technology was Jan Magnus Stjenberg, also director of the Swedish company. In 2021 the entire management was replaced with local Chinese staff. Therefore, Swedish influence within the board of directors was completely erased. 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 entailed in the joint venture wasn’t absorbed by Chinese actors. The changes in the management and business scope are aligned with Stjernberg Automation bankruptcy in 2019. Apparently, the Chinese acquisition back in 2017 constitutes the starting point of the jeopardization of the company’s activities. In fact, since 2017, the firm’s financial performance started shrinking with a decrease in production value of 8%, and a negative EBIT value of almost 1 million euro in 2019, the year in which the company went bankrupt.
The risk of unwanted tech transfer
The acquisition of the Swedish company in 2017 affected the parent company’s operations, while marking the start of the company’s exploration of the Chinese market with the establishment of joint ventures. The framework for investment screening at the EU-level should enhance and better coordinate FDI screening practices at the national level. Nevertheless, the responsibility of conducting thorough screening procedures that prevent sensitive technology fleeing from the EU still lies in the hands of national FDI screening units. The Stjernberg case study represents the need for discussion on the topic of unnoticed technology transfer to China.