This article first appeared in The Edge Malaysia Weekly on September 10, 2018 - September 16, 2018

AFTER being embroiled in a patent infringement lawsuit with rival Johnstech International Corp in the US over the past four years, high-performance test contacting solution provider JF Technology Bhd is ready to move on.

“Following the provision [for damages] made in FY2018, we now have a clean sheet again. FY2019 is going to be a very exciting year for us,” group managing director and executive chairman Datuk Foong Wei Kuong tells The Edge.

For FY2019 and FY2020, the provisions will be much lower than in FY2018, he says. “There will be no more high legal fees. From FY2019 onwards, we can only expect highly positive financial performances.”

Johnstech filed a patent infringement suit in June 2014 against JF Technology’s test socket product that was being sold under the brand name Zigma. On Aug 7, the US District Court for the Northern District of California issued an order awarding Johnstech damages amounting to US$1.51 million (RM6.1 million). However, Johnstech’s motion for JF Technology to pay its attorney’s fees was rejected.

While JF Technology has indicated that it will appeal, the group has provided for the damages of RM6.1 million and increase in legal fees of RM600,000. Heavily dragged down by the provision, JF Technology reported a net loss of RM4.01 million in the fourth quarter ended June 30, 2018 (4QFY2018), compared with the net profit of RM2.16 million a year ago. For FY2018, JF Technology’s net profit dropped 95% to RM328,000, from RM6.37 million a year ago.

Founded in 1999, JF Technology manufactures and supplies electronic products and components, including test probes and test socket products, to the semiconductor industry worldwide. Its customers include semiconductor assembly and test services provider Unisem (M) Bhd, turnkey packaging and test services provider Carsem (M) Sdn Bhd and integrated circuit test handler supplier SRM Integration (M) Sdn Bhd.

“We are not at the mercy of our customers. We have spread our sales to 16 countries and 60 global sites,” says Foong.

JF Technology’s products are selected and specified by these clients to test and screen microchips for major companies in the mobile device and automotive industries, such as Ford, BMW, Dell, Canon and Samsung.

Every integrated circuit (IC) made has to be tested for its functionality and reliability by using tester, test handlers, vision and test socket solutions.

“We engineer high-performance test contacting solutions to validate the integrity of internal circuitry of IC devices — which are produced in billions — going into smartphones, wearable electronics as well as automotive, solid state storage, military, internet of things, medical and electronic appliances,” says Foong.

Industry worth US$650 million

The global test contacting market is worth US$650 million today and comprises three segments. JF Technology’s closest peer in Malaysia, FoundPac Group Bhd, is focused on the US$490 million spring probes segment. JF Technology is one of the top three players in the US$90 million cantilever contacts segment. The group also competes head to head with Johnstech — the leading manufacturer of test contactors solutions for radio frequency (RF) applications — in the US$70 million rocking contacts segment.

Foong, who co-founded JF Technology with his wife Datin Wang Mei Ling, is the single largest shareholder of JF Technology with a 50.73% stake. Wang, an executive director, is the second largest shareholder with 10.68% equity interest.

New product to replace Zigma

Foong, 57, reiterates that JF Technology’s management does not believe it has infringed on Johnstech’s intellectual property (IP) rights. “We emphasise a lot on IP. We respect our competitors, but we also hope they respect us. Our Zigma was granted the patent in September 2015, but the jury still found us guilty,” he says.

Indeed, not many are aware that JF Technology is one of the country’s top IP owners. The group has 11 patents, with 37 pending. Eight of the patents were granted by the US Patent and Trademark Office and the remaining in Singapore and the Philippines. In July alone, three patents were granted in the US — for Eta, Bellmat and Gforce.

“We are one of the more aggressive players. Going forward, we expect more patents to be granted. Look at our efforts, look at our inventiveness and innovation, and the number of patents we have. They spell prosperity for the company,” Foong says proudly.

Between FY2014 and FY2018, JF Technology had spent RM16 million on the lawsuit and damages. “Yes, you may have the patent, but that does not mean your competitor cannot sue you. We respect the District Court’s decision, but we will move on to the next stage. We will start the appeal,” says Foong. “We believe we have not infringed. The structures of our products are very different. We also want to protect our reputation.”

Meanwhile, JF Technology has launched a new product, Zorro, to selected customers for field data collection.

If everything goes according to plan, Zorro will replace Zigma, says Foong. “The good news is, we believe Zorro will be a good replacement. I cannot disclose our sales target, but all I can say is Zorro will certainly gain traction. We don’t want to wait. We have to provide a solution for our customers,” Foong explains.

He adds that Zorro is essentially the continuation-in-part of Eta. In other words, Zorro is part of the Eta family.

“This patent is ‘colorably different’ from Zigma. We have asked our lawyers in the US to check throughly. They did, and they said we are good to go,” says Foong. (Colorably means seemingly genuine or legally valid.)

Tie-ups possible in near future

Meanwhile, JF Technology is also looking out for mergers and acquisitions (M&A) and is in preliminary talks with some companies in the US and the region.

“I can’t reveal their names, but they are doing similar business that could complement ours. They are sizeable, but they are not that big, and they are non-listed firms,” says Foong.

“I am interested in companies that are in the niche market. I also prefer high-growth companies, those that are highly protected in terms of IP. Hopefully, at least one deal will materialise in FY2019,” he concludes.

Listed on Bursa Malaysia’s Mesdaq in 2008, JF Technology had a market capitalisation of RM179.5 million as at last Thursday.

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