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CHIPS: Taiwan Pours Cold Water on China Chip-Buying Spree

By newsdoug on December 17, 2015

Bottom line: New remarks by Taiwan’s likely new president indicate a flurry of recent new cross-Strait chip tie-ups could be delayed, but most are likely to ultimately get approved in a new era of more pragmatic cross-Strait relations.

Taiwan presidential candidate cautious on new China chip tie-ups

In a move that I predicted earlier this week, Taiwan’s likely next president is pouring cold water on a nascent series of tie-ups between its fragmented high-tech chip industry and cash-rich partners from mainland China. The latest reports cite Tsai Ing-wen, presidential candidate of the opposition Democratic Progressive Party (DPP), calling a recent series of planned Chinese investments a “huge threat” to the island’s large but also struggling semiconductor industry.

Even I was a bit surprised by the alarmist tone of Tsai’s comments, as I previously predicted that she was likely to call for a slowdown in the recent series of new deals but not an outright halt. (previous post) Beijing was also somewhat surprised, and a top official called on Taiwan not to politicize such commercial transactions. Read Full Post…

CHIPS: China-Taiwan Chip Ties Grow with $3 Bln TSMC Plant

By newsdoug on December 8, 2015

Bottom line: TSMC’s plan for a $3 billion Nanjing chip plant marks the latest in a nascent but growing string of China-Taiwan tie-ups in the chip space, which could gain momentum under Beijing’s recent aggressive program to develop the industry.

TSMC to build $3 bln chip plant in Nanjing

After years of disappointment for failing to fulfill its potential, China high-tech chip sector has suddenly come to life over the last year with a flurry of deals that hint Beijing is taking the lead to promote the sector. The latest of those is one of the biggest and most significant yet in terms of technology, with word that Taiwan’s TSMC (Taipei: 2330; NYSE: TSM), the world’s leading contract chip maker, will build a $3 billion state-of-the-art 12-inch wafer plant in the city of Nanjing.

The move is particularly significant because TSMC is the clear global leader in high-tech microchip production, with a client list that includes most of the world’s major companies like Qualcomm (Nasdaq: QCOM) and Apple (Nasdaq: AAPL). The deal also marks the latest in a nascent series of tie-ups between China and Taiwan in the chip-making space, a potent combination that could someday counter current powerhouses in South Korea and Japan. Read Full Post…

TELECOMS: Unigroup’s Powertech Buy Tests Cross-Strait Tech M&A

By newsdoug on November 3, 2015

Bottom line: Taiwan should quickly approve Tsinghua Unigroup’s plan to buy a quarter of Taiwan’s Powertech for $600 million if it finds no security issues, which could help to accelerate cross-Strait high-tech M&A deals.

Unigroup, Powertech in cross-Strait microchip tie-up

One of the biggest equity tie-ups to date between high-tech companies across the Taiwan Strait was announced late last week, when the acquisitive Tsinghua Unigroup said it planned to buy a quarter of Taiwanese chip company Powertech (Taipei: 6239) for around $600 million. The deal would provide Unigroup with valuable production assets in its drive to build a major new global chip maker, and would give Powertech cash and other resources as it fights for advantage in the highly competitive chip sector.

And yet despite the obvious rationale for such a deal, only a handful of similar tie-ups have occurred to date due to the risks of getting vetoed by Taiwan on national security grounds, since they involve sophisticated technology. Read Full Post…

COMPUTERS: SMIC Joins Group Buying Stats ChipPac

By newsdoug on December 23, 2014

Bottom line: A new alliance between SMIC and a leading Chinese chip tester in the buyout of Singapore’s Stats ChipPac could be the latest signal of a Beijing-led drive to consolidate China’s chip sector.

SMIC joins group buying Stats ChipPac

The semiconductor world is buzzing today on news that a Jiangsu-based company will buy Singaporean semiconductor chip maker Stats ChipPac (Singapore: STAT), but what caught my attention was the name of leading Chinese chip maker SMIC (HKEx: 981; NYSE: SMI) as a member of the buyer group. I’ve been saying for many years now that China’s semiconductor sector is sorely in need of consolidation, but that such an overhaul is often blocked by the local stakeholders who often eschew mergers as they look after their own interests. Read Full Post…

Intel Seeks Relevance With Spreadtrum Tie-Up

By newsdoug on August 28, 2014

A headline this morning about a potential new China smartphone chip tie-up for Intel (Nasdaq: INTC) made me realize that this company that once ruled the global semiconductor market has been rapidly losing relevance these last few years. I can remember a time not long ago when finding news about Intel was a huge achievement for any reporter, as the company dominated the market for chips used to power most of the world’s PCs. Nowadays, Intel can’t even seem to attract the attention of China’s anti-trust regulators, who are conducting a series of high-profile probes on top computing names like Microsoft (Nasdaq: MSFT) and Qualcomm (Nasdaq: QCOM). Read Full Post…

SMIC Issues Bonds Amid Rising Confidence

By newsdoug on October 25, 2013

SMIC in $200 mln bond issue

Leading Chinese chip maker SMIC (HKEx: 981; NYSE: SMI) has just announced a relatively modest $200 million bond offer, hinting that investor interest may finally be returning to this perennial underperformer after years of disappointment. Not very many people even follow SMIC these days, and I’ll admit that I personally still watch the company because I hope that someday it can realize some of the potential that many once held for it. This latest bond offer looks positive because it’s being underwritten by 2 big foreign investment banks, JPMorgan and Deutsche Bank, meaning demand for the notes is coming from market-driven international investors rather than state-run Chinese buyers. Read Full Post…

SMIC: Under Fire From All Directions 中芯国际亏损显示其内外交困

By newsdoug on November 9, 2011

SMIC braces for long winter After a year and a half of strong performance that saw it shed its laggard image to become a profitable company under the leadership of a strong new CEO, SMIC (HKEx: 981; NYSE: SMI), China’s top microchip maker, is suddenly returning to its old ways as it comes under assault from forces both inside and outside the company. The sharp turnaround is painfully clear in SMIC’s latest results, which saw it drop sharply into the loss column — territory it was well familiar with for most of its life until CEO David Wang led it into profitability following his arrival at the struggling firm in late 2009. (English article) But perhaps more worrisome than its swing into the loss column was its sharp drop in revenues, which fell 24 percent as gross margins also plunged to near zero. The company has been in a near constant state of turmoil since the spring of the year, when internal politics led to Wang’s sudden ouster despite his stellar performance at turning SMIC around. (previous post) The situation finally settled down, but not after wreaking havoc on both SMIC’s operations and its share price, which has lost half its value since April and fell another 6 percent after the latest results were announced earlier this week. To be fair, SMIC has been the victim of forces outside the company as well, as the highly cyclical microchip sector heads into a new downturn following more than a year of strong growth — a factor that tends to hit weaker players more than the stronger ones. Industry leader TSMC (Taipei: 2330; NYSE: TSM) recently reported its own third-quarter profit tumbled 35 percent as the industry showed signs of slowing. (English article) Adding to SMIC’s woes, TSMC has also announced $1 billion in new capital spending for the year ahead, and Chinese media are reporting that nearly all of that will go to expanding the company’s capacity in China, most likely in its facility near Shanghai not far from SMIC’s own headquarters. (Chinese article) With so many factors working against it, SMIC may indeed be looking at a long winter ahead and I would expect it to report at least another year of losses and most likely more before it can struggle back into the profit column.

Bottom line: A combination of internal and external forces working against SMIC will keep it in the loss column for at least the next year, and most likely much longer.

SMIC Makes the Right Move With New CEO 中芯国际终於明智换帅

By newsdoug on August 17, 2011

Storm dissipates at SMIC with new CEO After a tumultuous few months that saw its shares lose half their value amid an internal power struggle, leading Chinese microchip maker SMIC (HKEx: 981; NYSE: SMI) has finally made a smart move by naming an apparently capable outsider as its new CEO (company announcement). The appointment was followed just days later by another announcement of the resignation of a troublesome COO who started the chaos by using Cultural Revolution-style tactics to force out a perfectly capable CEO as he tried to pursue the top position for himself. I have to congratulate SMIC’s major shareholder Datang for finally doing the right thing by getting rid of the former COO, Simon Yang (Yang Shining), who earlier convinced Datang to oust previous CEO David Wang, whose only “fault” was managing to return SMIC to profitability after four years of continuous losses. Datang was probably irked when it realized its mistake in ousting Wang, and was also probably upset when its investment lost half of its market value due to the ill conceived decision. New CEO Tzu-Yin Chiu’s arrival at SMIC from the top position at crosstown rival Huahong NEC means a possible merger between these two companies — rumored for years — could finally move forward as their stakeholders seek to create the world’s a new major chip maker that can compete more effectively with Taiwanese leaders TSMC (Taipei: 2330) and UMC (Taipei: 2303). I would look for a rebound in SMIC’s battered shares in the weeks ahead as markets grow more confident that the power struggle is truly over, and then wouldn’t be surprised to see SMIC continue its slow but steady rise that began under Wang’s leadership more than a year ago. We could even see the long-awaited merger with Huahong NEC in the next year, as both Chiu and SMIC’s recently named new Chairman Zhang Wenyi both have strong ties to the company.

Bottom line: The naming of a competent new CEO and departure of a troublesome COO will help to gradually restore investor confidence in SMIC.

中芯国际<0981.HK><SMI.N>近几个月因内部权力之争导致其股票缩水一半，该公司最终作出明智决定，任命邱慈云为其首席执行官（CEO）。几天后，中芯国际首席运营官（COO）杨士宁辞职。杨士宁曾使用计谋迫使前CEO王宁国辞职，试图自己夺得这一职位，中芯国际管理层随後陷入混乱。我要祝贺中芯国际大股东大唐终於做出正确决策，令杨士宁出局。杨士宁此前曾说服大唐赶走王宁国，而王宁国的唯一“错误”是，在中芯国际连续四年亏损後，设法使公司扭亏为盈。当大唐意识到不应辞掉王宁国後，可能会感到懊恼，而因为这个考虑欠妥的决定，导致其投资市值损失一半时，大唐或许还感到很沮丧。邱慈云从华虹NEC来到中芯国际，意味着两家公司合并或最终有望推进，这一传言已持续多年。其股东希望借此创建全球新的大型芯片制造商，从而更有效地与台积电<2330.TW>和台湾联华电子<UMC.N>竞争。我预计，由於中芯国际权力之争最终尘埃落定，市场信心将逐渐恢复，未来几周公司股价有望反弹，届时，中芯国际继续缓慢稳步增长将不足为奇。华虹NEC和中芯国际甚至有望明年合并，因邱慈云和中芯国际近期任命的主席张文义均与华虹NEC渊源颇深。

一句话：中芯国际COO杨士宁离职，邱慈云出任CEO，将有助於逐步恢复投资者信心。