Cross-border "chip manufacturing", 15 listed companies entered the semiconductor industry through mergers and acquisitions

In 2018, Sino-US trade frictions were on the verge of breaking out. The subsequent ZTE incident popularized the importance of the semiconductor industry to the Chinese people. Technology giants such as Alibaba, Baidu, Tencent, Foxconn, and Gree have joined the "chip manufacturing" camp.

In 2019, trade frictions intensified, filling the gap in the domestic market and achieving independent control became the primary task of the semiconductor industry. The "chip manufacturing" camp further expanded, and manufacturers from industries such as mobile phones, home appliances, security, chemicals, military industry, department stores, real estate, the Internet, artificial intelligence, and photovoltaics crossed over and entered the semiconductor industry.

In 2020, trade frictions continued and the epidemic arrived quietly. The demand for localization of the semiconductor industry chain became more urgent, and the trend of cross-border "chip manufacturing" became more and more obvious. A large number of listed companies accelerated the mergers and acquisitions of semiconductor manufacturers, or joined the ranks of investing in the semiconductor industry chain.

Entering the semiconductor industry through mergers and acquisitions

It takes ten years to sit on the bench. In the past, the high threshold of the semiconductor industry blocked most entrants. The old semiconductor companies that have survived to this day all have deep industrial accumulation, advanced technology and abundant funds.

As the localization of chips is imminent, the capital market's attention to semiconductor companies has rapidly increased, and a large number of non-semiconductor listed companies have poured into the chip industry. In the absence of technical support and industrial accumulation, mergers and acquisitions are undoubtedly an effective shortcut for non-semiconductor companies to quickly enter the chip market.

Once upon a time, Wingtech Technology acquired the internationally renowned power semiconductor manufacturer Nexperia, and successfully entered the 100 billion market value club in the capital market; Wanye Enterprise acquired the semiconductor equipment supplier Shanghai Kaisitong, and successfully transformed into the integrated circuit industry equipment and materials field; Yak Technology successively acquired Jiangsu Xinke, Huafei Electronics, Comet, etc., and successfully switched from the field of phosphorus flame retardants to the field of semiconductor materials, completing the track switch.

In the A-share market, there are numerous successful cases like the above, and they have been basically recognized by the capital market. With these successful cases in mind, a large number of non-semiconductor listed companies have entered the field of “chip manufacturing” through mergers and acquisitions.

According to incomplete statistics from Jiwei.com, 15 non-semiconductor industry listed companies launched acquisitions of semiconductor companies in 2020. Among them, most of the listed companies chose to enter the fields of photoresist, analog chips, filters, IC distribution, etc.

Targets such as photoresist, analog chips, filters, and IC distribution are favored

From an industrial perspective, photoresists, analog chips, and filters all have extremely high technical barriers and rely heavily on experience accumulation and technical talent. It is difficult for potential entrants to conduct reverse analysis and imitation of the above products. Therefore, the above industries present an oligopolistic pattern and have long been monopolized by professional companies in Japan, Europe and the United States.

On the other hand, the market size of the above-mentioned products continues to expand, and there is broad room for future growth. However, for domestic manufacturers, there are still major technical bottlenecks in high-end photoresists, analog chips, and filter products.

As Sino-US trade frictions continue to escalate, the industry is increasingly concerned about the security of the supply chain, and the localization of chip products such as photoresists, analog chips, and filters is also imminent.

Under this circumstance, listed companies involved in photoresists, analog chips, and filters are popular in the capital market and given higher valuations. It is understandable that a large number of listed companies choose to enter this field through mergers and acquisitions.

Unlike the fields of photoresist, analog chips, and filters, the IC distribution field has relatively low requirements for technology, but is highly dependent on capital, supplier and customer resources, and spot reserve capabilities. Therefore, there are a large number of domestic distributors, and the distribution scale is generally small, resulting in fierce competition.

However, compared with semiconductor manufacturers in other links, IC distribution companies have a unique advantage, that is, it is not difficult to increase revenue. They can not only transform into the semiconductor industry, but also deliver a relatively impressive financial report.

Of course, listed companies’ transformation into the semiconductor field is not just through mergers and acquisitions.

Among A-share listed companies, companies including Cuiwei Shares, Luxshow Technology, GCL Integration, and Precision Electronics have chosen to enter the semiconductor industry by setting up subsidiaries and investing in semiconductor projects. Many companies, including Shangfeng Cement, Changfei Optical Fiber, Jiahua Energy, Quartz Shares, Liba Shares, Sotong Development, Shenzhen Konka, Huamao Technology, Infitec, Dongfang Electronics, and Juzi Technology, have chosen to participate in the establishment of semiconductor funds, laying out semiconductor businesses on the basis of consolidating their main businesses.