China's integrated circuit foreign acquisitions have become a long-lasting challenge

The attitude and method of participating in this round of global industry integration is related to the future of China's rapidly growing integrated circuit (IC) industry and the rise of manufacturing power.

Especially in the new economic normal, how to deal with the "sequel" of advanced industry mergers and acquisitions, so that it truly achieves "M&A, digestion, absorption" and re-innovation and re-development has become a long-lasting challenge.

On March 13, Intel (Intel) announced a $15.3 billion acquisition of Mobileye, an Israeli auto-driving technology provider. The BBC calls it "a gamble." Previously, in 2015, Intel also acquired Altera for $16.7 billion, integrating CPU technology and FPGA technology. The layout of the Internet of Things began in 2015, and the global integrated circuit industry entered a new round of mergers and acquisitions, with unprecedented industrial integration. According to Merrill Lynch, global semiconductor acquisitions in this year exceeded $128 billion, an increase of 236.8% from the previous year and $156 billion in 2016.

The prominent feature of the current round of industry integration is the tens of billions of dollars in mergers and acquisitions: there are 8 in two years. Thus, in the integrated circuit industry, resources are increasingly concentrated in leading companies, and their monopoly advantages are becoming more and more obvious. By 2016, the top 20 companies in the industry will have sales revenues of approximately US$280 billion, an increase of nearly US$10 billion from 2015. This represents an increasingly concentrated industry.

In this round of mergers and acquisitions, Chinese companies have also gained. For example, Beijing Qingxin Huachuang acquired Haowei Technology, Jianguang Capital acquired NXP's RF Power department and standard product department, Wu Yuefeng Capital acquired US core semiconductor, Beijing Sui Tang Shenglong Acquisition of Mattson, Ziguang Technology, and Western Digital data.

The latest news is February 14th, China's non-volatile flash memory technology (NOR Flash) memory chip leader Zhao Yi Innovation to 6.5 billion yuan to fully support the original ISSI listed on the NASDAQ.

However, the "going out" of China's integrated circuit capital, the actual harvest: At present, only Jiangsu Changjiang Electronics Technology Co., Ltd. acquired the new plus-packed test factory Xingke Jinpeng, SMIC IC Manufacturing Co., Ltd. acquired Italian integrated circuit Five cases, including the 70% stake in the foundry LFoundry, were finalized.

The main challenge is: the limited resources of companies that can choose and acquire, and the need to face the intervention of developed countries in Europe and America. Even if the merger is completed, it is faced with the problem of whether it can transfer the advanced technology of the acquired company to the domestic market and further develop new technology based on its technology.

Ye Tianchun, director of the National Integrated Circuit Special Technology Institute and director of the Institute of Microelectronics of the Chinese Academy of Sciences, told the "Financial Weekly" reporter that compared with the first three problems, follow-up funds, especially supporting R&D investment, will seriously restrict China's IC industry. development of. In this way, the advanced technology bought back may also face an embarrassing situation that is unsustainable.

Especially in the case of domestic de-leverage and tightening of foreign direct investment, China’s IC industry, which has just started and is far from being strong, needs new policy support design.

Who can Chinese capital buy?

Yan Shijing, Director of the Department of Electronic Information of the Ministry of Industry and Information Technology, told the reporter of Caijing National Weekly that overseas mergers and acquisitions are an important task for China's IC industry to continue to expand foreign cooperation and implement the State Council's National Development Plan for Integrated Circuit Industry. The inevitable law of industrial development. Because the integrated circuit industry is an international industry, no country has a full industrial chain.

The first problem facing Chinese IC companies to "go global" mergers and acquisitions is that the appropriate acquisition projects are limited. This is mainly affected by the conditions and willingness of both parties to buy and sell.

Such as the world's largest personal computer parts and CPU manufacturer Intel, Samsung, the world's largest supplier of memory, and the world's largest wafer foundry, Taiwan Semiconductor Manufacturing Co., Ltd. (TSMC) is impossible to sell or possible Purchased by mainland Chinese capital.

Lin Jianhong, a researcher in the semiconductor industry, a researcher in the industry of Trend Force, Taiwan, told the reporters of the Financial and Economic Weekly that an important reason is that in the IC industry, the number one company in the market is sure to make money. Two people make small money, and the third one may earn or lose. "A company that makes money is impossible to sell." Therefore, M&A objects can only be selected from loss-making enterprises.

Another reason is that some foreign integrated circuit companies continue to grow in mergers and acquisitions. For example, in May 2015, American Avago Technologies (Avago) acquired Singapore's Broadcom for $37 billion. After the acquisition, Avago Technologies became a "big Mac" company with a strong portfolio of wired and wireless communications.

Anwar High Tech has thus become an unsuitable acquisition target: its share price has risen from more than 100 US dollars in May 2015 to around US$ 210 in February 2017, and its total market capitalization has reached more than 80 billion US dollars.

In addition, key technologies involving important areas are susceptible to intervention by seller countries. Wang Xinyang, general manager of Changchun Changguang Chenxin Optoelectronic Technology Co., Ltd., told the reporter of Caijing National Weekly that China’s IC capital or enterprises had wanted to acquire companies involved in key areas such as infrared and night vision, such as Fairchild Semiconductor. Success, "China can buy back compared to the low-end consumer technology."

Wang Xinyang introduced that from the strategic point of view, the most lacking products in China's IC industry are first of all kinds of sensors, such as accelerometers, gravity sensors and image sensors, and other types of ASIC products; the second is the processor (CPU); Programming logic controller (PLC), the heart of high-end electronic systems. "This is the weakness of the country, especially high-end chips are 100% dependent on imports, but companies with such products are almost impossible to acquire."

In general, foreign companies engaged in design and packaging are relatively well acquired, and the acquisition of manufacturing plants is relatively difficult.

Wang Xinchao, chairman of Jiangsu Changdian Technology Co., Ltd., the world's third largest integrated circuit packaging factory, told the reporter of Caijing National Weekly, "Because the merger of small manufacturing plants can not shorten the technological gap between Chinese companies and international counterparts, but truly advanced. Technology is difficult to acquire."

From the buyer-China IC Capital, such as the "Nuclear High-Based" major special master, Wei Shaojun, director of the Tsinghua University Microelectronics Institute, analyzed the "Financial Weekly" reporter, the lack of China's integrated circuit industry is external mergers and acquisitions The experience, because there is no capital, no technical accumulation, "no conditions to go out and buy."

In addition, corporate culture and acquisition cost issues are also an important reason for the impact of China's IC capital overseas M&A projects. The current M&A cases have inherent advantages of the same or similar culture. For example, the founder of OmniVision, which was acquired by CITIC Capital Holdings Co., Ltd., is Chinese.