Chip Merger Near, More Consolidation Ahead? 华虹NEC和宏力半导体合并预示未来或有更多整合
As a longtime tech reporter, I was intrigued to see that one of China’s longest running M&A deals that never quite seems to happen has once again popped into the headlines, perhaps paving the way for an even bigger and sorely needed consolidation in the foundering microchip sector. Industry followers will know that of course I’m talking about a merger between Hua Hong NEC and Grace Semiconductor, both midsized players that hoped to become major forces in the contract chip-making business but never achieved the scale necessary to do that. The 2 sides, and more importantly their impatient investors, have been talking for years about a merger, but this time foreign media are reporting they have actually reached a deal, which should close by year-end. (English article) The new company will have total assets of about $1 billion, according to the report, or roughly equivalent to China’s biggest contract chipmaker, SMIC (HKEx: 981; NYSE: SMI). But considering that SMIC’s market cap now stands at about $1.4 billion and the new company would have a similar profile, this newly merged company will still be a tiny player compared with industry leader TSMC (Taipei: 2330; NYSE: TSM), with a market cap of $63 billion, and even compared to number two player UMC (Taipei: 2303; NYSE: UMC), with a market cap of $5.8 billion. A more interesting proposition would be to see this newly created company merge with SMIC to create a player that could seriously challenge UMC, at least in terms of scale. SMIC is suffering from its own issues, including a power struggle earlier this year that saw its reputable CEO get ousted (previous post), and an industry downturn that saw it slip back into the red after reporting a year of profits. (previous post) But if the Hua Hong NEC-Grace merger finally does go through, I wouldn’t be surprised to see talks begin within a year for another merger of that company with SMIC as the two companies’ backers look to create a serious new global competitor. I would still have my doubts about whether such a new company could really compete with TSMC and UMC, but at least it would have the size and customer base to make a serious attempt at putting China on the global microchip map.
Bottom line: The merger of Hua Hong NEC and Grace Semi signals consolidation in China’s chip sector may finally be underway, paving the way for a potentially even bigger merger with SMIC.
Related postings 相关文章:
◙ SMIC: Under Fire From All Directions 中芯国际亏损显示其内外交困
◙ SMIC Makes the Right Move With New CEO 中芯国际终於明智换帅
◙ SMIC: Consolidation Ahead 中芯国际任命新高管 或有助於业内合并
