Thursday, 21 September 2023

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Japan-backed fund offers US$6.2 bln to buy chip firm Japan Synthetic Rubber Co.

TOKYO, JAPAN — A fund backed by Japan’s government has offered to buy out JSR Corp., a firm central to the manufacture of semiconductors, in a deal worth US$6.2 billion, the company said Monday.

JSR said in a statement its board was in favour of the deal, which would privatise a company that is a key producer of compounds vital to the manufacture of semiconductors.

Japan Investment Corporation (JIC), the fund behind the deal, hopes to finalise it by December, but there are regulatory procedures that make a precise timeline hard to predict, JSR said.

“This is truly an exciting day for JSR,” company CEO Eric Johnson told reporters after the announcement.

“With JIC, we aim to be a catalyst for reform in the semiconductor materials space, as well as to improve the biopharmaceutical capabilities” both domestically and globally, he said.

The deal, he added, would “enable acceleration and reform” in the chip sector.

JIC is an investment fund founded in 2018, with the government as the majority investor, along with smaller private-sector partners.

The 0.9 trillion yen offer comes as Tokyo, along with many governments, tries to stabilise supply chains for the chips that are central to the modern economy.

The tiny slices of silicon are found in all types of electronics — from LED lightbulbs and washing machines to cars and smartphones.

They are also critical to core services such as healthcare, law and order and utilities.

Globally, semiconductors are forecast to become a US$1-trillion industry by 2030.

But pandemic disruption and tensions with China have raised concerns globally about the risks in existing chip supply chains.

Countries from France to Israel have been looking for ways to incentivise chip-making at home or take greater control of production.

In April, the European parliament and EU states agreed a plan to boost local chip production and build a global market share in the key industry.

And in May, Micron said it would invest US$3.6 billion to produce next-generation semiconductors in Japan after the country’s prime minister met with some of the world’s biggest chipmakers.

Japan has already agreed to pour half a billion dollars into a new project to develop and make next-gen chips domestically.

That deal involves eight major companies, including Sony, SoftBank and Toyota, who are partnering with a new firm called Rapidus that hopes to begin mass production by 2027.

TSMC and Sony have also inked their own partnership for a US$7 billion plant in Japan.

JSR is a market leader in the manufacture of materials including photoresists for circuit formation, which are central to producing semiconductors.

It controls around 30 per cent of the global market for photoresists, according to Bloomberg, and along with two other Japanese firms almost completely dominates the production of two other key ingredients used to make displays and chips.

Rumours of the possible acquisition deal had been circulating for days, and JSR stock closed up 21.64 per cent to 3,934 yen ahead of the company’s announcement.

Travis Lundy, an analyst at Quiddity Advisors who publishes on SmartKarma, said the JIC offer made sense “given Japanese government’s efforts to grow the semiconductor industry”.

“JIC is starting here. It would surprise me quite a bit if that is where they stopped,” he added in a note published when rumours of the deal first emerged.

Chips have also emerged as a key source of tension between Washington and Beijing, with the United States leaning on Japan and the Netherlands this year to curb exports of semiconductor technology.


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