Semiconductors have long been rival Taiwan's forte but the People's Republic is muscling in. A $1.8 billion Chinese offer for a Singaporean chip-packager is the latest attempt to bring tech know-how to the mainland. More buys are likely to follow.
China's desire to beef the domestic design of semiconductor chips - the electronic brains powering ever-smarter devices - has powered a number of transactions. The $780 million cash offer by Jiangsu Changjiang Electronics (JCET) for Singapore's STATS ChipPAC is the latest in that vein.
The Chinese company is offering a 35 per cent premium to its target's share price in May, before news of takeover talks leaked out. However, shareholders in the company, controlled by Singaporean investor Temasek, were hoping for more. The offer is a 22 per cent discount to the last market price before the announcement.
The combination makes sense for JCET, which will be able to serve higher-end clients and integrate more advanced technology into its existing business. It's no doubt also motivated by a government push for investment. While China is the world's biggest consumer of semiconductors, most are imported. Beijing would prefer device-makers to source quality chips and related services from home.
That explains the flurry of deal-making in the past year. Tsinghua Unigroup, a holding company associated with China's most prestigious science-focused university, has been building up a local chip-design champion to rival Qualcomm of the United States and Taiwan's MediaTek. It took control of processor-maker Spreadtrum Communications last year and added US-listed chip designer RDA Microelectronics in July. Tsinghua Unigroup has since sold a 20 per cent stake in the two businesses to Intel for $1.5 billion.
With foreign know-how in hand, the next step for these groups is to consolidate their business in China. More deals are almost certainly on the way.
China's desire to beef the domestic design of semiconductor chips - the electronic brains powering ever-smarter devices - has powered a number of transactions. The $780 million cash offer by Jiangsu Changjiang Electronics (JCET) for Singapore's STATS ChipPAC is the latest in that vein.
The Chinese company is offering a 35 per cent premium to its target's share price in May, before news of takeover talks leaked out. However, shareholders in the company, controlled by Singaporean investor Temasek, were hoping for more. The offer is a 22 per cent discount to the last market price before the announcement.
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The two sides will also have to jump through a number of hoops to get the deal done. Most importantly, the Singaporean group has to hive off its Taiwanese assets in order to avoid falling foul of the island-state's restrictions on ownership by mainland Chinese companies. Those bits account for roughly 10 percent of STATS ChipPAC's value.
The combination makes sense for JCET, which will be able to serve higher-end clients and integrate more advanced technology into its existing business. It's no doubt also motivated by a government push for investment. While China is the world's biggest consumer of semiconductors, most are imported. Beijing would prefer device-makers to source quality chips and related services from home.
That explains the flurry of deal-making in the past year. Tsinghua Unigroup, a holding company associated with China's most prestigious science-focused university, has been building up a local chip-design champion to rival Qualcomm of the United States and Taiwan's MediaTek. It took control of processor-maker Spreadtrum Communications last year and added US-listed chip designer RDA Microelectronics in July. Tsinghua Unigroup has since sold a 20 per cent stake in the two businesses to Intel for $1.5 billion.
With foreign know-how in hand, the next step for these groups is to consolidate their business in China. More deals are almost certainly on the way.