Chinese firms in quest for more strategic semiconductor deals

China’s aggressive policy to expand its semiconductor industry is expected to drive major mainland companies to pursue more cross-border mergers and acquisitions this year, unfazed by scrutiny from overseas regulators, according to analysts.

It will likely remain difficult, however, for Chinese firms to buy enterprises involved in strategic product segments of the integrated circuit market, such as central processing units, field-programmable gate arrays, graphics processing chips, digital signal processors and high-end memory chips.

“We think China’s integrated circuit investment community has been aware of increasing attention from foreign regulators,” Jefferies equity analyst Rex Wu said.

A Jefferies report on Monday indicated that mainland Chinese corporate investments in less sensitive product segments – including microelectromechical systems, display drivers and radio frequency integrated circuits – are poised to continue.

Data from research firm Mergermarket showed that the US$2.75 billion acquisition of NXP Semiconductors’ Netherlands-based Standard Products business, now called Nexperia, to Beijing Jianguang Asset Management and private equity fund Wise Road Capital, was the seventh-largest deal in China’s technology, media and telecommunications (TMT) sector last year.

Nexperia is a global supplier of so-called discrete and logic chips, as well as power metal oxide semiconductor field-effect transistors.

Mergermarket analyst Sophie Jin said Chinese companies’ appetite for overseas acquisitions “will remain large this year, as more of them expand their presence globally”.