Bottom line: China used its traditional silent treatment approach to kill Qualcomm’s bid to buy NXP, quite possibly to show its displeasure with recent US trade tensions, but resulting global pressure could forced it to be more transparent in the future.
China kills Qualcomm-NXP deal with silent treatment
We’ll close out the week with my own quick-and-dirty post mortem of the collapsed deal that would have seen telecoms chip maker Qualcomm (Nasdaq: QCOM) purchase Dutch rival NXP (Nasdaq: NXPI) for $44 billion. Put simply, this deal appears to have been killed by China’s classic approach of “kill them with silence.”
But there’s a bit of a postscript this time around, as China’s regulator took the unusual step of actually breaking its silence once the deal was dead. This appears to show that China has learned a lesson from this particular battle, namely that it needs to take a stance on things and explain its decisions, even if people might disagree. That would be quite a break from its old approach of just sticking its head in the sand and pretending like nothing is happening when it makes unpopular decisions. Read Full Post…
Bottom line: The US is likely to take a tougher stance towards Chinese M&A of politically sensitive companies following Trump’s veto of a major deal, but in such cases will still need to justify the national security risk.
Trump vetoes sale of chipmaker
In a move that is sure to make major waves but wasn’t completely unexpected, Donald Trump has made his first big statement on the sale of US high-tech companies to Chinese buyers by formally blocking a relatively large deal that was pending for quite some time. Followers of the space may recognize I’m talking about chipmaker Lattice Semiconductor (Nasdaq: LSCC), which was set to be bought by a China-backed private equity firm in a deal that has dragged on for more than a year.
Some might argue that this marks a big setback for cross-border M&A between China and the US in the high-tech realm, though the decision does seem consistent with what we’ve seen in the past. I’ll recount some of the deals we’ve seen previously vetoed for similar reasons, which usually involves defense applications. Perhaps the major difference here is that Trump has made the first such move quite early in his presidency, which could presage a more aggressive position for national security reviews in future deals. Read Full Post…
Bottom line: Samsung’s new $7 billion investment in a chip expansion in Xi’an should help to earn big government goodwill, which could help position its smartphone division for a rebound in China.
Samsung expands chip chip plant
A major new China investment by chip maker Samsung(Seoul: 005930) is spotlighting just how important the market has become to the company, and South Korean companies in general, and how they are trying to play into Beijing’s agendas to maintain their place at the table. That’s become all the more important lately, as a disagreement between Beijing and Seoul has been costing South Korean companies business in China, as often happens when such political disputes spill out into the business sector.
This particular investment, totaling $7 billion, was obviously in the planning stages long before that dispute broke out earlier this year, involving Seoul’s decision to install a sophisticated anti-missile defense system supplied by the US to counter the North Korean threat. But Samsung’s decision to make its announcement now looks shrewd, as it should win it some goodwill from Beijing at a time when the company’s smartphones face similar struggles in China that they’re seeing in the rest of the world. Read Full Post…
Bottom line: Lattice Semiconductor’s sale to a Chinese buyer stands a 50-50 chance of getting national security clearance, benefiting from warming ties between the US and China and lack of defense-related technologies involved.
Lattice still trying to sell to Chinese buyer
More than a year after it first became an acquisition target for chip-hungry Chinese buyers, Lattice Semiconductor (Nasdaq: LSCC) is back in the headlines again with what looks like a last-ditch effort at salvaging a sale. Lattice is clearly a mid-sized maker of microchips that fits the profile of what Beijing would like to buy, with a market cap of about $840 million, as China tries to build up its own semiconductor sector that can compete with global giants like Intel (Nasdaq: INTC), Qualcomm (Nasdaq: QCOM) and TSMC (Taipei: 2330).
But western governments are wary of China’s aggressive ambitions, which include generous funds for M&A of Asian and western chip makers. A deal first announced more than a year ago saw one of the most aggressive buyers, Tsinghua Unigroup, buy a small stake in Lattice, but then fail to parlay that into an outright acquisition. Now another group, Canyon Bridge Capital Partners, is getting ready to make a third appeal for its plan to purchase Lattice in a filing to the regulator that reviews such deals for national security considerations. Read Full Post…
Bottom line: Seagate’s closure of its Suzhou factory, combined with its earlier formation of a Chinese technology-sharing joint venture, reflect the changing approach away from local manufacturing that western tech firms are taking towards China.
Seagate closes Suzhou factory
New reports are saying that hard disk drive maker Seagate (NYSE: STX) is closing down a factory in the eastern city of Suzhou, as part of a restructuring plan to revive its operations. Such a development isn’t huge news, since the global semiconductor sector is undergoing a major consolidation.
But this particular closure also comes just months after Seagate announced a new tie-up with Chinese partner Sugon to tap the local market for IT products and services. So the bigger question becomes: What’s the meaning of this factory closure and the newer joint venture, and what’s the outlook for semiconductor and high-tech equipment manufacturing in China? Read Full Post…
Bottom line: Growing national security concerns are likely to kill the pending purchase of Germany’s Aixtron by a Chinese buyer, and could also kill the pending sale of NXP’s standard products unit to a similar buyer.
Germany calls for review of Aixtron sale to China
A major cross-border chip deal that I failed to notice earlier this year is suddenly in doubt, with word that Germany has reversed course and wants a security review for the proposed sale of local chipmaker Aixtron (Frankfurt: AIXA) to a Chinese buyer. Such a move would mark the first potential killing of a cross-border chip deal in Europe, which would be following the US and Taiwan in voicing concerns about China’s sudden voracity for overseas makers of high-tech microchips. Read Full Post…
Bottom line: Meizu will be forced to sign a new licensing agreement with Qualcomm after new lawsuits against it in the US, France and Germany, while NXP’s sale of a major unit to a Chinese buyer could still get vetoed in Europe despite new US clearance.
NXP chip sale cleared in US
A couple of cross-border stories involving global western chip giants Qualcomm (Nasdaq: QCOM) and NXP (Nasdaq: NXPI) are in the headlines, reflecting China’s growing role in the global semiconductor market. The first has Qualcomm suing Chinese smartphone maker Meizu for patent infringement in the US, Germany and France, some 4 months after taking similar action in China. The other has the US clearing NXP’s planned sale of one of its major units to a Chinese group for $2.75 billion, indicating that Washington won’t attempt to block a deal in the sensitive high-tech chip space. Read Full Post…
Bottom line: SMIC’s new plan for a $10 billion cutting-edge chip plant shows it could be well positioned to find a place on the global stage by tapping strong government support after an overhaul of its own operations.
SMIC announces $10 bln chip plant
I rarely write these days about SMIC (HKEx: 981; NYSE: SMI), since the company once billed as China’s best hope to challenge global chip giants like Intel (Nasdaq: INTC) and TSMC (Taipei: 2330) has been a major disappointment since its Hong Kong listing a decade ago. But the company’s newly announced plan for a $10 billion cutting-edge plant was enough to catch my attention, and shows SMIC could become a company to watch due to Beijing’s sudden determination to build up a globally competitive chip sector at any cost. Read Full Post…
Bottom line: New remarks by TSMC Chairman Morris Chang could signal a revival of several stalled mainland investments in Taiwan’s microchip sector, with new focus on creating mechanisms to prevent IP theft.
TSMC remarks hint at revival of China-Taiwan chip deals
New reports are citing one of Taiwan’s most influential technology executives saying he welcomes investment from China, offering a tantalizing new path to the island for Chinese high-tech firms who so far have been rebuffed in such moves. The new signals are coming from the chairman of leading Taiwanese high-tech chip maker TSMC (Taipei: 2330), who is saying he could accept a Chinese investor as a strategic stakeholder as long as the company doesn’t require a place on his company’s board. Read Full Post…
Bottom line: Unigroup’s cautious approach to the potential acquisition of a small US chip maker reflects political realities that make larger purchases difficult, dealing a setback to China’s dreams of quickly building a chip-making giant.
Unigroup buys into Lattice Semiconductor
After being rebuffed several times in the US and Taiwan, China’s ambitious Tsinghua Unigroup is back in the chip acquisition headlines with word that it’s exploring a possible purchase of smaller US chip designer Lattice Semiconductor (Nasdaq: LSCC). Unlike the earlier failed deals that were either outright acquisitions or purchases of major stakes worth billions of dollars, this latest deal is quite small both in dollar terms and stake size.
That would seem to indicate that Unigroup and its affiliated sister companies, all housed at the prestigious Tsinghua University, are shifting to a more cautious approach targeting smaller companies in their global M&A strategy. We saw a similar move earlier this month, when a Shanghai-based government-backed buyer bid for Okmetic (Helsinki: OKM1V), a Finnish chip design house with a market value of about $200 million. (previous post) Read Full Post…
Bottom line: Fairchild’s decision to halt talks to be acquired by a Chinese group reflect mounting US national security concerns over cross-border M&A from China, which are likely to remain high until after this year’s presidential election.
Fairchild calls off talks with Chinese buyer
The Year of the Monkey is shaping up as a busy time for Washington officials reviewing China-US deals for national security concerns, with word that such concerns have killed a bid for Fairchild Semiconductor (NYSE: FCS) by a Chinese buyer. In this instance, it was Fairchild itself that decided to terminate the discussions with a group led by a unit of Chinese conglomerate China Resources, citing worries that such a deal would get vetoed by Washington.
Fairchild’s decision marks the latest case in a recent rise of US-China deals thrown into doubt over national security concerns, which has its roots in several factors. Several of the killed deals have come in the high-tech semiconductor chip sector, which is now in the process of global consolidation. Adding to the pressure are an increasingly aggressive group of cash-rich Chinese global buyers looking to expand beyond their traditional realms of natural resources and other low-end products. Read Full Post…
