By Rick Carew and P.R. Venkat
China's ambitions to gain influence in the global semiconductor
industry through deal-making is taking it to Singapore.
Jiangsu Changjiang Electronics Technology Co. has made a $780
million offer to buy its Singapore rival, STATS ChipPAC Ltd., both
companies said in a filing Thursday.
The deal is the biggest Chinese acquisition in the semiconductor
space since private-equity firm Hua Capital Management's $1.7
billion acquisition of OmniVision Technologies Inc. in August,
according to Dealogic. It is also the latest in China's drive to
build up its edge in the chips that go into everything from
smartphones to cars.
Jiangsu Changjiang and STATS ChipPAC, which is majority owned by
Singapore state investment firm Temasek Pte, have entered into an
exclusive agreement until Nov. 30 and will work toward a
"definitive agreement," the two chip testers and packagers said in
their filing to the Singapore Exchange Thursday. By buying STATS
ChipPAC, which is worth $1.8 billion if debt is included, according
to people with knowledge of the situation, Shanghai-listed Jiangsu
Changjiang gets access to one of the world's top companies in its
field.
Jiangsu Changjiang's market cap is also around $1.8 billion,
while STATS ChipPAC ended trade with a market value of $996 million
Thursday.
The deal is the latest to showcase China's bid to build its
domestic companies' technology prowess and bulk up its presence in
the $325 billion global semiconductor industry.
China has become a hub for global production of smartphones and
other electronics, but has lagged behind in semiconductors, where
companies like Intel Corp., Samsung, and Qualcomm Inc. are key
players. The government, however, is trying to change that and has
been actively been giving financial support for the homegrown
semiconductor industry as well as announcing plans to spend almost
$5 billion on a fund to support the microchip industry.
Through STATS ChipPAC, Jiangsu Changjiang gets a global player
in the chip testing and packaging industry.
STATS ChipPAC is the world's No. 4 chip-packaging and testing
company by market share after Taiwan's Advanced Semiconductor
Engineering Group, U.S.-based Amkor Technology and Taiwan-based
Siliconware Precision Industries Co., and has manufacturing plants
across Asia, including China, South Korea and Malaysia. The
Singapore firm, whose shares soared 76% after it disclosed
approaches made to it early in the year, also has offices in U.S.
and Europe.
Founded in 1972 and based in China's eastern coastal province of
Jiangsu, Jiangsu Changjiang says on its website that it is the
country's largest semiconductor packaging service provider,
offering semiconductor assembly and testing. The company had net
profit of 11.1 million yuan ($1.8 million) in 2013, up 6.8% from
2012, according to S&P Capital IQ, and has five manufacturing
facilities in Jiangsu and Anhui provinces. Its revenue rose 15% to
5.1 billion yuan.
Temasek plans to tender its holding in STATS ChipPAC company to
the Chinese buyer under the exclusivity arrangement, according to
one person.
The World Semiconductor Trade Statistics, an industry nonprofit,
forecasts that the industry will grow by 6.5% this year to reach
$325 billion. The group says that demand is driven by smartphones,
tablets, and the expansion of computing systems in automobiles.
Meanwhile, China's homegrown chip industry continues to grow,
with domestic players like Fuzhou Rockchip Electronics Co. and
Allwinner Technology Co. increasing their presence by supplying
chips used in low-end smartphones and tablets.
Citigroup Inc. is advising STATS ChipPAC on the sale. The U.S.
investment bank has handled a number of mandates for Singapore's
Temasek in the technology industry. Deutsche Bank AG and China
International Capital Corp. are advising Jiangsu Changjiang
Electronics.
Prudence Ho and Juro Osawa contributed to this article.
Write to Rick Carew at rick.carew@wsj.com and P.R. Venkat at
venkat.pr@wsj.com
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