For China’s chip companies with money in hand, acquiring foreign chip firms has always been a shortcut to obtaining talent and technology. However, acquisitions are facing more resistance overseas, as deals to buy NWF and Magnachip are likely to be blocked. 

Around 86% of the 57 semiconductor merger and acquisition (M&A) deals by Chinese firms between 2015 and 2019 targeted foreign firms, making the country the primary buyer of international chip companies, according to Deloitte China. Now, Western countries are increasing scrutiny of those deals.


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Two blocked acquisitions: On July 7, British Prime Minister Boris Johnson said his government will review an offer by Nexperia, a Dutch firm wholly owned by China’s Wingtech, to buy the UK’s largest chipmaker, Newport Wafer Fab (NWF).

  • The deal met with little regulatory pressure when it was announced in early July. At the time,  the UK government said it wouldn’t intervene in the deal.
  • But some politicians have lobbied to take a harder line. On July 5, Tom Tugendhat, a conservative member of parliament and the chairman of the parliamentary Foreign Affairs Committee, said he would be “very surprised” if the deal was not being reviewed under the National Security and Investment Act, a November law brought in to protect key UK assets from foreign takeover.
  • Hamza Mudassir, visiting fellow in Strategy at the Cambridge Judge Business School, argued in a commentary that NWF “is neither strategically nor financially significant enough for the UK government to justify an intervention” because of its outdated technology.
  • NWF mainly produces 180-nanometer (nm) wafers, while the bleeding edge of the industry is the 3 nm process by Taiwan’s TSMC and South Korea’s Samsung.

In late June, the US government halted a Chinese investment firm’s acquisition of South Korean chipmaker Magnachip. Nevertheless, Chinese regulators subsequently gave the deal a  green light.

  • Wise Road Capital, a Beijing-based private equity firm, announced the acquisition of Magnachip in March for $1.4 billion. 
  • Magnachip is a manufacturer of driver chips in smartphone displays, producing circuits controlling other components like organic light-emitting diode (OLED) displays.
  • The Committee on Foreign Investment in the United States (CFIUS), a panel headed by the Secretary of Treasury and consisting of nine other US cabinet members, blocked the deal on June 15 through an interim order. According to a June 17 filing by Magnachip, CFIUS also blocked the company from delisting from the US stock market, which Wise Road Capital reportedly said it planned to do after the acquisition.
  • On June 10, Business Korea reported that South Korea’s  Ministry of Trade, Industry and Energy had proclaimed Magnachip a “national core technology,” making the deal subject to the South Korean government’s approval.

Change of attitude: Neither the UK’s NWF nor South Korea’s Magnachip is a leading player in the semiconductor industry, and it’s likely both deals would have gone through easily a few years ago. The investigations are clear signs that Western governments are changing their view of Chinese firms buying their chipmakers.

  • When Netherlands-based Nexperia was acquired by Chinese contract smartphone maker Wingtech in 2018, the transaction was completed smoothly despite being subject to review by both the US and Dutch regulators.
  • Chris Miller, an assistant professor at Tufts University’s Fletcher School of Law and Diplomacy, wrote that by stopping Chinese firms from taking insignificant chip firms like Magnachip, the Biden administration had “de facto decided that all chip firms—even if small, seemingly innocuous, and barely linked to the United States—are off limits to Chinese buyers.”
  • “If Magnachip isn’t allowed to couple up with a Chinese private equity fund, it is hard to imagine anyone else will be allowed to, either,” Miller wrote in a commentary in June.

Also in the news

A spree in STAR listing of chip firms: In what Chinese media called a “sprint” of chip listings, Shanghai’s STAR Market accepted a record 13 semiconductor companies in June and July out of the 34 companies it approved in the two months.

  • These companies include Shanghai-based Puya Semiconductors, which makes storage chips, and Jiangsu-based Macmic, a designer and manufacturer of radio-frequency semiconductors.
  • The registration-based high-tech board now has a total of 50 semiconductor shares as of Tuesday, more than 15% of its total listed companies.

China chip production hits a record high: On July 15, the South China Morning Post reported that China produced 30.8 billion wafers in June, citing government data.

  • The number beat the previous single-month record of 29.9 billion units in May.
  • For the first half of the year, China’s semiconductor production reached 171.2 billion units, up 48.1% from the same period last year.
  • Still, the production is insufficient to meet domestic chip demand. The country imported more than 310 billion integrated circuits in the first half of the year, said the report, citing customs data.

No bailout for troubled chip champion: A major semiconductor conglomerate that owns many of China’s leading chip companies was forced into bankruptcy proceedings. On July 9, Tsinghua Unigroup, a state-backed chipmaker, said a creditor of the company has proposed bankruptcy proceedings for the company over bond defaults. It’s a sign that Beijing is willing to let national champions fail, even if they’re working on semiconductors.

  • The company didn’t disclose the total amount of its unpaid debts. The Wall Street Journal reported in December that the group had defaulted on nearly $2.5 billion of international bonds.
  • The bankruptcy proceedings are still subject to rulings of a Beijing court, which accepted the case on July 16, Chinese media reported. 
  • Tsinghua Unigroup, backed by the prestigious Tsinghua University, is among China’s largest chip conglomerates. The company is also notable for owning China’s first 128-layer NAND and its blocked bid for Micron.
  • Chinese e-commerce giant Alibaba is considering bailing out Tsinghua Unigroup. Reuters reported on July 13 that Alibaba and several Chinese state-backed firms were weighing bids for a stake in a subsidiary of Tsinghua Unigroup, potentially providing it with funds to settle the debt dispute.

Writing about semiconductors and telecommunications.