GlobalWafers acquires Siltronic, semiconductor silicon wafer industry landscape changes

December 1 report: At the end of the year, the global semiconductor industry merger and acquisition wave is still hot. Yesterday, the world's third largest semiconductor silicon wafer manufacturer GlobalWafers (hereinafter referred to as "GlobalWafers") announced that it would acquire the world's fourth largest semiconductor silicon wafer manufacturer Siltronic (hereinafter referred to as "Siltronic") for US$4.5 billion. If the acquisition is finally realized, GlobalWafers will take the throne of the "number one" in the semiconductor silicon wafer market share.

Analysts pointed out that the semiconductor silicon wafer industry has been relatively stable for many years. GlobalWafers' acquisition of Siltronic with a large sum of money is quite ambitious and will form a three-way competition. In the future, the status of Japan's Shin-Etsu and SUMCO in this field will be impacted.

GlobalWafers' largest M&A case

On November 30, GlobalWafers announced the acquisition of Siltronic on its official website. It plans to acquire Siltronic's outstanding shares at a price of 125 euros per share, a premium of about 48%, and the total transaction amount is 3.75 billion euros, or about 4.5 billion US dollars. Wacker Chemie, the major shareholder of Siltronic, promised to sell all of its Siltronic shares (about 30.8% of the total issued shares of Siltronic) to GlobalWafers during the public acquisition period.  

GlobalWafers said that the acquisition is expected to formally sign a business merger agreement in the second week of December, and the two parties have entered the final negotiation stage.

The global semiconductor silicon wafer industry has a high degree of market concentration and is mainly occupied by well-known companies from countries and regions such as Japan, Germany, South Korea, and Taiwan, China.

The prospectus of a domestic listed semiconductor silicon wafer manufacturer shows that the top five semiconductor silicon wafer companies in the world are currently large in scale, with a combined market share of 93%. Among them, Japan's Shin-Etsu Chemical has a market share of 27.58%, Japan's SUMCO has a market share of 24.33%, Germany's Siltronic has a market share of 14.22%, Taiwan's GlobalWafers has a market share of 16.28%, and South Korea's SK Siltron has a market share of 10.16%.

Therefore, if the acquisition is finally realized, GlobalWafers will surpass the two Japanese companies and become the number one in market share.

Taiwanese media reports pointed out that GlobalWafers is the world's third largest semiconductor silicon wafer manufacturer in terms of revenue, and Siltronic is the fourth largest. If the merger is completed, GlobalWafers will become the second largest manufacturer in the industry, second only to Japan's Shin-Etsu.

Some analysts also pointed out that the main statistical indicator for measuring semiconductor silicon wafer industry data should be silicon wafer shipment area. If calculated based on silicon wafer shipment area, GlobalWafers will become the leader after the acquisition is completed.

Why is Shichuang seeking to sell?

Siltronic is headquartered in Munich, Germany and the company is listed in Germany. In 2019, its global revenue was approximately 1.3 billion euros (approximately 1.56 billion US dollars) and its operating profit was 300 million euros.

The above analysts pointed out that in recent years, Siltronic's revenue has been decreasing year by year. The silicon wafer industry has maintained a relatively stable pattern for many years, and the overall scale has remained at around US$11 billion. In the global fluctuation cycle, the semiconductor silicon wafer field, as a bulk product, has put considerable pressure on production and operation.

At the same time, the semiconductor silicon wafer industry and the semiconductor industry chain have been showing a trend of shifting to Japan, South Korea, Taiwan, and other East Asian countries and regions. Currently, there are no semiconductor silicon wafer manufacturers in the United States, and Siltronic, located in Europe, is increasingly facing challenges in its business development.

"GlobalWafers has been constantly buying and buying in the past two years, and Siltronic has also been rumored to be acquired. China's semiconductor fund, Tsinghua Unigroup, has been the rumored acquirer, but under the current external environment, the probability of a Chinese company taking over is very small. It is reasonable for Wacker, the major shareholder of Siltronic, to sell Siltronic to GlobalWafers for strategic considerations. Moreover, the price of US$4.5 billion offered by GlobalWafers is attractive enough compared to its annual revenue of US$1.5 billion." The above analysts pointed out.

GlobalWafers' ambitions are becoming apparent

The acquisition of Siltronic will be the largest M&A in the history of GlobalWafers. GlobalWafers is regarded as a "M&A maniac" in the industry. In recent years, it has continued to consolidate its leading position in the semiconductor silicon wafer field through various mergers and acquisitions.

In 2012, GlobalWafers acquired the semiconductor silicon wafer subsidiary of Covalent, the sixth largest Japanese company in the world. After 2016, it acquired Denmark's Topsil and the United States' SunEdison Semiconductor, becoming the world's third largest semiconductor silicon wafer manufacturer, second only to the two Japanese giants Shin-Etsu and Shengco.

"Looking at GlobalWafers' past development history, although it has been continuously expanding its scale through mergers and acquisitions, its integration effect is good, and it has established production bases in many countries. Its M&A integration capabilities are worth learning from," said the above analyst.

Industry analysts believe that GlobalWafers has great ambitions in this heavy move, because this acquisition will change the relatively stable pattern of semiconductor silicon wafers for many years, forming a three-way competition, and will also threaten the core position of Japanese manufacturers in this field.

Industry insiders pointed out that industrial mergers are a basic means of development for the semiconductor industry, which wants to acquire technology and expand market share. At present, GlobalWafers' acquisition is mainly intended to increase the scale of market share, which will help further consolidate the industry's monopoly advantage and increase its ability to resist risks.

 Impact on the industrial chain

It is worth mentioning that this is a rare large-scale merger and acquisition case in Taiwan's semiconductor industry in recent years. It is also the second time that Taiwan has taken the leading position in the key link (materials) of the semiconductor supply chain after TSMC (manufacturing) and ASE (packaging and testing). Taiwan's importance in the semiconductor industry chain is becoming increasingly prominent.

The above-mentioned person told Jiwei.com that the acquisition may have a potential impact on the two leading Japanese companies in the future. Judging from the current expansion progress of GlobalWafers and the development trend of the entire industry chain, the two Japanese companies will be impacted. For South Korea's SK Siltron, which has always ranked fifth, there may be greater variables in the future.

For domestic semiconductor silicon wafer manufacturers, the above analysts said that the impact is not significant at present. It is just that the number of manufacturers with a monopoly position in the industry has been reduced from five to four, and the main competitors have not changed. On the raw material side, it may be that after Wacker sold Siltronic, it has a higher priority than before, and the supply of polysilicon materials will be more open to domestic manufacturers.

"There is still a certain gap between mainland enterprises and these leading silicon wafer manufacturers in terms of the number of product certifications, applicable technology nodes, etc. Mainland semiconductor silicon wafer manufacturers are currently in the process of striving to catch up with international advanced companies." The above analysts emphasized.