In a response to an inquiry from the Shanghai Stock Exchange regarding the information disclosure for a major asset purchase plan, Jiangsu Hengshang Energy Conservation Technology Co.,Ltd. (ASX: 603137) has provided details. The company intends to acquire a 100% stake in Jinsheng Electronics for a sum not exceeding 600 million yuan.

Jinsheng Electronics' primary business involves the research, design, production, manufacturing, and sale of storage devices such as solid-state drives and memory modules. Its production process is not merely simple assembly or just piecing together purchased components. Instead, it operates as a storage module product provider, with its core competencies centered on storage particle screening and testing, firmware adaptation, product customization, SMT process control, automated testing and verification, and quality management.

Currently, the target company's business operations do not extend into high-value-added segments. The core raw material for Jinsheng Electronics is memory chips, whose production capacity is predominantly concentrated among a limited number of domestic and international chip manufacturers.

The target company lacks the capability to independently research, develop, produce, or manufacture memory chips. Its sole method of obtaining these chips is through procurement from upstream suppliers. If, in the future, key suppliers encounter operational issues, adjust their production capacity, change their supply policies, or if the cooperative relationship between the parties deteriorates adversely, Jinsheng Electronics may face challenges in securing timely and sufficient supplies of its primary raw material.

Furthermore, fluctuations in memory chip prices significantly impact the target company's operating performance. Should memory chip prices experience a rapid upward trend and the company is unable to promptly pass on the increased costs through higher prices for its storage products, it could lead to a decline in Jinsheng Electronics' gross profit margin. Conversely, if memory chip prices fall sharply, it may necessitate the company to make provisions for inventory write-downs.