China's antitrust regulator is scrutinizing the attempt by Diodes Inc. – an American manufacturer and supplier of discrete, logic, analog and mixed-signal semiconductors – to acquire the Taiwan-based Lite-On Semiconductor Corp. along with its Shanghai-based affiliate, On-Bright Electronics Inc. According to Bloomberg, the scrutiny was necessitated by fears in China that the $428 million deal would deliver the Chinese affiliate of Lite-On into American hands and compromise national interests.
As a reference, Diodes Inc. has a market capitalization of $2.33 Billion and a trailing twelve-month income of $138.3 million. On the other hand, On-Bright – the Chinese maker of chipsets for power management that's listed in Taipei – has a market cap of NT$9.88 billion ($324 million).
The Texas-based Diodes Inc. had launched its bid in August for Lite-On Semiconductor which, as per regulatory filings, holds almost a third of the Chinese Bright-On firm. The deal was expected to conclude by April 2020. Moreover, a Lite-On Semiconductor representative informed Bloomberg that Diode had filed for an antitrust review by Chinese authorities in mid-September.
This development marks the growing suspicion that American M&A activities presently garner in China. The State Administration for Market Regulation in China seems to be receptive to the cautionary note emanating from multiple industry organizations regarding this acquisition. Consequently, the regulator may call for the exclusion of the Chinese affiliate from this deal.
Diodes Incorporated and Lite-On.
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How China plans to lead the computer chip industry
On a university campus on the outskirts of Hong Kong a group of engineers are designing computer chips they hope will be used in the next generation of Chinese made smart phones. Patrick Yue leans back in his chair in a coffee shop on the campus, sporting a Stanford University t-shirt. He is the lead engineer and professor overseeing the project. His research team designs optical communication chips, which use light rather than electrical signals to transfer information, and are needed in 5G mobile phones and other internet-connected devices.
[...] China has made no secret of its desire to become self-sufficient in technology. The nation is both the world's largest importer and consumer of semiconductors. It currently produces just 16% of the semiconductors fuelling its tech boom. But it has plans to produce 40% of all semiconductors it uses by 2020, and 70% by 2025, an ambitious plan spurred by the trade war with the US. [...] In October this year, in its latest bid to help wean the nation's tech sector away from US technology, the Chinese government created a $29bn (£22m) fund to support the semiconductor industry.
"There is no question that China has the engineers to make chips. The question is whether they can make competitive ones," questions Piero Scaruffi, a Silicon Valley historian, and artificial intelligence researcher who works in Silicon Valley. "Certainly, Huawei can develop its own chips and operating systems, and the government can make sure that they will be successful in China. But Huawei and other Chinese phone makers are successful also in foreign markets, and that's a totally different question: Will Huawei's chips and operating systems be as competitive as Qualcomm's and Android? Most likely not. At best, it will take years before they are," Mr Scaruffi adds.
Mr Scaruffi estimates that China could be as many as 10 years behind the leading producers of high-end computer chips. The majority of chips made for high-end electronics are manufactured by specialist foundries like the Taiwanese Semiconductor Manufacturing Company (TSMC). It produces more than 70% of chips designed by third party companies.
[...] [Yue] believes that Chinese technology is three to four generations behind companies like TSMC. China lacks the industry experience to manufacture high end chips, he says. But he believes that companies like Huawei are already competitive when it comes to designing chips.
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(Score: 3, Funny) by driverless on Thursday November 21 2019, @09:02AM
... 8.2K 5% Resistors Inc, 0.01uF Greencap Capacitors Inc, or 10uH SMD Miniature Inductors Inc.
(Score: 0) by Anonymous Coward on Thursday November 21 2019, @10:19AM
About the only hope for success involves Xi being addicted to golf at Mar-a-Lago.
(Score: 3, Informative) by c0lo on Thursday November 21 2019, @10:43AM (2 children)
Given China is involved with UHV DC power transport [economist.com], I find the reason of "national interest" as plausible (rather than a payback to Trump's trade war).
https://www.youtube.com/watch?v=aoFiw2jMy-0 https://soylentnews.org/~MichaelDavidCrawford
(Score: 2) by Farkus888 on Thursday November 21 2019, @12:17PM
This is an excellent point, without it it would be obvious that China benefits from the merger. The argument from the actually informed is largely about stealing business IP. This merger would give them more opportunity to steal from Diodes Inc. After all, bigger companies outsource more and they'd already have facilities there. With your extra information, it shows that the US would have the opportunity to steal a tech they developed in house and are ahead on.
(Score: 2) by loonycyborg on Thursday November 21 2019, @04:13PM
If some Chinese company is bought and made part of US company then trade restrictions suddenly start to apply to it, most likely causing a huge disruption because they have to break ties to their old Chinese partners, so it's rational for Chinese government to not want it.