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China's Actions Semi eyes more acquisitions

Posted: 05 Feb 2007 ?? ?Print Version ?Bookmark and Share

Keywords:Actions Semiconductor? fables designer? chip? acquisition? multimedia?

China fabless designer, Actions Semiconductor, is scouring the Chinese landscape, as well as overseas, looking to scoop up small design firms with a recently approved $80 million budget for acquisitions and investment.

The move is an unusual one in China's design house industry. China companies, as well as in Taiwan, usually prefer organic growth to mergers or acquisitions, especially when it comes to buying foreign companies that may be a difficult cultural fit.

Although $80 million may be modest by some measures, it is nearly half of Actions' annual revenue. The amount will be leveraged by additional funds that venture capitalists and Actions' original investors are willing to ante up, said David Lee, Actions senior executive based in Zhuhai, China. The investment arm is called Actions Capital.

The company will focus on companies developing technology related to its multimedia platform, which mainly consists of MP3 and MP4 player chips. It will also look to invest in "promising technology" that may be outside of its near-term core focus. Lee noted that the company has already approached one South Korean firm in a deal potentially valued at about $200 million.

With a reported 500-600 small IC design houses, China would prove fertile ground for picking up new engineering teams. "There are a lot of returnees establishing companies with a focus on advanced technology, especially in the consumer area," Lee said. "Most of them are facing difficulty in terms of developing the IP into the right product at the right time and then commercializing it, using the Chinese platform. It seems to us that they all have growing pains, so these companies interest us very much."

The "Chinese platform" refers to Actions past success in quickly ramping up its business in MP3 player chips by forming tight relationships with a host of Shenzhen-based system developers. By focusing heavily on support, Actions quickly transformed from an underdog newcomer to one of China's largest fabless company and a serious competitor to SigmaTel Inc., which once dominated the MP3 market.

Lee said Actions experience with the labyrinthine Chinese supply chain, and its ability to negotiate lower foundry pricing would make it an attractive partner for many smaller companies.

- Mike Clendenin
EE Times

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