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Why is China bullish on chip industry?

Posted: 03 Jun 2015 ?? ?Print Version ?Bookmark and Share

Keywords:merger? consolidation? Big Fund? ROI? M&A?

Since just before the company was delisted, Spreadtrum has doubled its workforce to 4,000 now. By year's end, it expects to employ 5,500 people.

Money is also buying market share. Describing the first quarter of this year as "my best quarter ever in the highest revenue and shipment," Li said that Spreadtrum held a 22 per cent share in the global mobile processor market with smartphones and feature phones combined.

Li pointed out, "Staying in this [mobile] game, you need to have market share. Without a volume business, nobody can survive."

Judging from what appears to be ballooning operational expenses, Spreadtrum is growing share at the expense of profitability. But that's the edge in being private. For now, the company can focus on its own growth.

Impatient investors, however, might want to hasten Spreadtrum back to the public market. Li said an IPO is unlikely until 2016 or 2017. But a future IPO is a great incentive in hiring talent, Li said. "We tell them to come to work for us, because you can grow with us."

Whether Spreadtrum can become a truly global mobile processor giant that rivals Qualcomm and Mediatek remains to be seen. As Li acknowledged, "Money allows us to do certain things, but it doesn't buy a real business." At least for now, China has made Spreadtrum China's own superstar in the mobile chip market, expecting the company to grow.

3. China on a hunt for more acquisitions

Despite Wei's statement that China's Big Fund is more interested in spending on "chip manufacturing," China's private equity funds are hot to acquire companies with technologies that might either augment China's domestic semiconductor industry or possibly leapfrog the global market.

Chinese state-owned investment firms bought several U.S.-listed chipmakers in the last two years, including Montage Technology Group, Spreadtrum and RDA.

Last April, OmniVision Technologies, a maker of chips for smartphone and tablet cameras, agreed to be taken private by a group of Chinese investors for about $1.9 billion in cash.

Chinese private equity firms Hua Capital Management Co Ltd, CITIC Capital Holdings Ltd and GoldStone Investment Co Ltd paid $29.75 per share for the company.

The Chinese investors' buyout proposal was first reported last August, but it took almost eight months to close the deal.

NXP Semiconductors NV said last week it would sell its RF Power unit to the Chinese state-owned investment company Jianguang Asset Management Co. for $1.8 billion, in a bid to secure approval for its previously announced acquisition of Freescale Semiconductor.

Meanwhile, Integrated Silicon Solutions Inc. (ISSI), Milpitas, Calif.-based SRAM chip vendor, is in the midst of a takeover tango between Cypress Semiconductor and a group of Chinese venture capital firms bidding under the holding company Uphill Investment.

ISSI Monday acknowledged it received Cypress' unsolicited $20.25 a share offerslightly more than the sweetened $20 a share deal it reached with Uphill Investment.

A special meeting of ISSI shareholders is scheduled for June 12 to vote on the Uphill offer.

Expect more to be added on China's shopping list.

- Junko Yoshida
??EE Times U.S.

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