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In recent years, China's semiconductor industry has developed rapidly, with many companies emerging on the international stage, and cross-border mergers and acquisitions have undoubtedly played a significant role in this process.

In 2016, the packaging and testing manufacturer Jiangsu Changjiang Electronics Technology Co., Ltd. (JCET) acquired STATS ChipPAC, the fourth-largest packaging and testing company globally, becoming the third-largest packaging and testing manufacturer worldwide. Tongfu Microelectronics also acquired two packaging and testing factories of AMD in Suzhou and Penang, Malaysia, in 2016. In recent years, driven by the major customer AMD, the packaging and testing business has flourished.

In April 2018, Wingtech Technology Co., Ltd. acquired NXP Semiconductors' Standard Products business, which is a global leader in upstream core components such as logic chips, discrete devices, and power semiconductors.

In July 2019, Weier Shares acquired the American company OmniVision Technologies, becoming the world's third-largest CMOS image sensor company.

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In November 2019, Beijing Junzheng acquired the American storage chip design company ISSI, becoming a rare domestic leader in automotive storage chips. Omdia data shows that in 2022, Beijing Junzheng's SRAM, DRAM, and NOR Flash product revenues ranked second, seventh, and sixth in the global market, respectively, placing them at the forefront of the international market.

In 2023, Xichu Microelectronics completed the acquisition of the Dutch company Ampleon (referred to as "Ampleon"), the world's second-largest mobile base station RF semiconductor company, with a transaction amount exceeding ten billion yuan. After the acquisition, Xichu Microelectronics directly became the world's second-largest mobile base station RF component supplier.

Undoubtedly, mergers and acquisitions are an important means for the growth of semiconductor companies, regardless of national boundaries. Counting some of the domestic and foreign semiconductor giants, mergers and acquisitions are an important stepping stone on their path to development and growth. In 2023, mergers and acquisitions on the international stage were booming, such as Japan's acquisition of the ArF photoresist leader JSR, Infineon's acquisition of GaN Systems, Qualcomm's intention to acquire the Israeli company Autotalks, and Renesas Electronics' acquisition of Pantronics, etc. However, there are few Chinese capital or Chinese enterprises involved. What's worse, some mergers and acquisitions have failed. Nowadays, due to various factors, it has become more difficult for domestic semiconductor companies to acquire overseas companies.

Those semiconductor companies that China cannot buy

In recent years, a series of unsuccessful acquisitions have occurred in the domestic semiconductor field. For example, in February 2016, the American Fairchild Semiconductor company rejected the offer from Chinese acquirers. In November of the same year, Fujian Hongxin Fund's acquisition of the German LED semiconductor equipment MOCVD leader Aixtron was also interfered with and stopped by the US government. In addition, in September 2017, the US stopped the transaction of the Chinese background private equity fund (Canyon Bridge Fund Partners) to acquire the American chip manufacturer Lattice.

With the increasing tension between China and the United States, the US's determination to suppress the development of China's semiconductors has become more and more intense. The US's review of investments in China will be stricter, making it more difficult for China to carry out cross-border acquisitions and cooperation in the semiconductor field.In December 2021, Sino-Micro Electronics announced its intention to acquire the automotive chip manufacturing line-related assets of Elmos in Dortmund, North Rhine-Westphalia, Germany (referred to as "German FAB5") for 84.5 million euros (approximately 600 million yuan in RMB). The Elmos automotive chip manufacturing line, which was established in 2009 and is in good operating condition, is referred to as "German FAB5."

The announcement stated that by acquiring the automotive chip manufacturing line-related assets of Elmos, the company would further expand its core business scope of sensor and chip process manufacturing into the field of automotive electronics. It would also rapidly enhance the overseas capacity for manufacturing integrated MEMS and CMOS chip processes, facilitating the company to actively seize the development opportunities of the global semiconductor specialty process manufacturing industry, especially the rapidly growing demand for global automotive chips and MEMS chips. This would promote the further development of the company's business, enhance its comprehensive competitiveness globally, and ultimately implement the company's long-term development strategy after transformation, which is to focus on the main business and strive to become a well-known semiconductor technology enterprise group based in the local area and developed internationally.

However, Sino-Micro Electronics' plan could not be implemented. In November 2022, the German Federal Government banned the acquisition of the German Elmos automotive chip production line by the Swedish Silex on the grounds of "threatening the order and security of Germany." Sino-Micro Electronics expressed deep regret in its announcement and continued to value and focus on the automotive chip industry and related business layout.

Elmos, which Sino-Micro Electronics failed to acquire, is about to be taken over by the American company Littelfuse. On June 28, 2023, Elmos announced that it had agreed to sell the wafer factory at a net purchase price of about 93 million euros, which has a highly skilled technical team of about 225 employees. In addition, Elmos and Littelfuse have agreed to a clear multi-year capacity sharing arrangement, with an initial term lasting until 2029, during which Elmos will purchase a certain number of wafers produced by the wafer factory. The transaction is expected to be completed by December 31, 2024, subject to certain conditions and regulatory approvals. Through the acquisition of the Dortmund wafer factory, Littelfuse has enhanced its capabilities in power semiconductors.

On May 23, 2023, Pulsic, a British EDA company acquired by one of the three giants of EDA, Candence, was also intended to be purchased by the Hong Kong investment institution Super Orange HK a year earlier. Pulsic, founded in 2000, is an EDA company specializing in providing solutions for chip design on advanced custom nodes, with many years of accumulation in the layout and routing fields, with a revenue of 3.8 million pounds in 2022. However, the British government prevented the acquisition of Pulsic by the Chinese consortium on the grounds of national security. In response, the Chinese Embassy in the UK stated: "Any abuse of national security review will only damage the UK's investment environment and long-term interests."

According to Hong Kong public documents and Chinese enterprise data, Super Orange HK is backed by a domestic EDA software enterprise. It is well known that the EDA industry is an industry with highly representative acquisitions, and EDA giants have all strengthened their technical capabilities, expanded market share, and obtained new customers and product lines through a large number of acquisitions. In recent years, China's EDA enterprises have started to enter the market with point tools and are gradually developing and growing by complementing the product line. Such actions by the British government have indirectly curbed the pace of development and growth of domestic EDA enterprises.

It is not only difficult to acquire overseas semiconductor enterprises, but even the "duck in the mouth" of Anshi Semiconductor - Newport Wafer Fab also faces uncertainty.

The ins and outs of the matter are as follows: In July 2021, Anshi Semiconductor, a subsidiary of Wantai Technology (located in the Netherlands), completed the acquisition of Newport Wafer Fab, the largest compound wafer factory in the UK, with a transaction amount of 63 million pounds (about 75 million US dollars). Before this, Anshi Semiconductor initially held a 14% stake in Newport Wafer Fab, and after the acquisition, it owned 100%. Before being acquired, this wafer factory was already struggling to survive, with a loss of 13 million pounds in 2020.

However, on November 16, 2022, the British government issued a statement stating that after a detailed assessment of national security, it blocked Anshi Semiconductor's acquisition of the wafer factory and required Anshi Semiconductor to sell at least 86% of the equity of Newport Wafer Fab within a specified period, according to a specified process, that is, to restore the shareholding before the acquisition. At that time, the 582 employees of the factory strongly opposed this decision by the British government. Since Anshi Semiconductor's acquisition, Newport Wafer Fab has continued to lose money, with a loss of about 15.1 million US dollars, and a large part of the loss is borne by Anshi Semiconductor. Anshi Semiconductor stated that selling the wafer factory may lead to the closure of the factory.

Although Anshi Semiconductor has hired law firms in the United States and the United Kingdom to fight against the British government's decision to revoke its acquisition of Newport Wafer Fab, the situation does not seem very optimistic. If this wafer factory is forced to "spit out," it is very likely to become an investment target for semiconductor manufacturers in other countries. According to reports in the Daily Telegraph, chip manufacturers STMicroelectronics (ST) and GlobalFoundries have both expressed interest in purchasing this wafer factory.Overseas Subsidiaries Difficult to Control

However, even after acquisition, there are many uncertain factors. With the United States further suppressing Chinese semiconductor companies by increasing export control measures, not only is there a lack of fixed standards, but there is also no bottom line. What is more detrimental is that the positions of some other countries have also begun to waver. For Chinese companies that have acquired overseas semiconductor companies through mergers and acquisitions, they face some obstacles in terms of technology exchange and collaborative development, which has a huge impact on the domestic semiconductor industry.

Firstly, the technology export of overseas subsidiaries faces risks. For example, in October 2021, the Swedish government rejected the application for technology export from Silex, a subsidiary of Semtech located in Sweden, to Semtech's Beijing production line (FAB3). Although Semtech has solemnly stated that since the company started its semiconductor business, it has always been isolated from the original navigation and aviation electronics business and is not involved in military purposes, the Swedish government still made the decision to prohibit export.

This move also has an adverse impact on the medium and long-term development of Semtech's Beijing FAB3. Semtech pointed out in the announcement that the 8-inch MEMS production line of Silex Beijing needs to continue to independently explore relevant production skills, and achieving process maturity may require more time and cost; the expansion of the category of MEMS wafers to be processed will continue to rely on itself and cannot be accelerated through technical support from Silex in Sweden; for the original Chinese mainland customers of Silex in Sweden, their plan to transfer production to Silex Beijing may also slow down.

Furthermore, overseas subsidiaries cannot receive the due and fair chip subsidy treatment. Around April 2023, foreign media reported that Germany removed Nexperia, a subsidiary of Wingtech Technology, from the government's subsidy list. Germany had included Nexperia in the subsidy list of the Important Project of Common European Interest, IPCEI, in December 2021 to assist in the development of energy-saving chips. According to German officials, "to prevent the outflow of technology and suppress China's influence in the chip field," Germany plans to remove Nexperia from the government subsidy list.

In conclusion, it can be seen that whether it is the direct intervention of the U.S. government or the pressure of review, if the current situation continues to develop, the road of overseas mergers and acquisitions for domestic semiconductor companies to find high-quality targets overseas will become more and more difficult in the future, and their review of Chinese investment will be more stringent. Although domestic semiconductor companies may face some challenges and difficulties, it does not mean that there is no opportunity for overseas acquisitions. The specific situation of different companies will vary, and as time goes on, the situation may also change. Changes in factors such as government support, technological breakthroughs, financial support, and international cooperation may provide more acquisition opportunities for domestic semiconductor companies.

Under such circumstances, mergers and integration among domestic companies will become a trend, which is also a favorable choice for the development and growth of domestic semiconductor companies. For example, recently, Jiangbolong acquired Licheng Technology Suzhou Company, adding a new business of storage chip packaging and testing. In the field of silicon wafers, TCL Zhonghu's subsidiary, Zhonghu Leading, acquired Xinxin Semiconductor; in the field of power chip, Jingfeng Mingyuan acquired Nanjing Lingou Chuangxin Electronics; in the field of EDA software, EDA startup company Riguan Xinsi acquired Xinyun Microelectronics, Huadad Jiutian Jin acquired Xinda Technology, and Xinhuazhang carried out core technology integration for Shunyao Electronics. For more details, please refer to the content in "Semiconductor M&A Tide, Coming Back?" These mergers and integrations will promote the integration and optimization of domestic semiconductor resources, and achieve economies of scale and synergy. In the future, through efforts in technological innovation, talent training, industrial ecosystem construction, policy support, and international cooperation, domestic semiconductors will usher in a brighter future.