A five-year-old Chinese private equity fund is emerging as a front runner in acquiring semiconductor operations across Asia and Europe, and in some cases relocating the assets to China in line with Beijing’s desire for greater self-sufficiency in chips.
Wise Road Capital appeared on the radar in 2017 when it joined sister fund JAC Capital to acquire NXP Semiconductors’ standard products business for US$2.75 billion, renaming the unit Nexperia.
In June last year, Wise Road sold its equity stake in Nexperia to Wingtech Technology, a deal hailed by China’s official Xinhua news agency as one that “not only created China’s largest integrated device manufacturer in chips, but also generated high returns to investors”.
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Now Nexperia is buying Newport Wafer Fab, the largest chip foundry in Britain, according to a stock filing by Wingtech on Tuesday. Nexperia, already the second-largest shareholder of Newport Wafer, will own 100 per cent after the deal.
Separately, Wise Road generated headlines in South Korea after it tried to buy MagnaChip Semiconductor Corp, a spin-off from Hynix Semiconductor. Although Beijing quickly granted approval for Wise Road to go ahead, the deal is now under review by Seoul after the US Committee on Foreign Investment in the United States (CFIUS) issued an interim order blocking the US$1.4 billion deal.
Gary Ng, Asia Pacific economist at investment bank Natixis, said it was almost impossible for foreign regulators to adopt a “one-size-fits-all” approach to distinguish whether a Chinese fund is commercially or politically driven.
“With the strategic competition between China and the US, and increasingly other economies, the real question is probably whether such technologies are important enough for foreign regulators to block the transactions. In other words, it is all about whether the technologies will fall into the hands of competitors,” he said.
Newport and MagnaChip are not the only semiconductor deals initiated by Wise Road. In August 2020, the Chinese fund completed the purchase of Singapore-based UTAC, the world’s third-largest chip packaging and testing company. A few months later, UTAC bought the wafer bumping operations of Singapore’s Powertech Technology.
In 2019, Wise Road became the majority investor in a new joint venture with Austrian-based semiconductor sensor specialist AMS, which is also a supplier to Apple.
For all its deals, little is known about Wise Road’s structure and source of funds. Its registered capital base is just 100 million yuan (US$15.4 million), according to corporate registry records.
On its website, Wise Road describes itself as a global private equity fund targeting semiconductors, mobile technology, automotive electronics, robotics and smart manufacturing, and internet of things, adding that its investments follow the principles of being international, market-oriented, independent and “client first”.
Phone calls and emails sent to the company seeking comment were not answered.
Wise Road often relocates production to China after it purchases overseas assets, with local Chinese governments usually rolling out the red carpet. For example, one month after it completed its UTAC acquisition in Singapore, Wise Road signed an agreement with the local government to set up a UTAC plant in the port city of Yantai, in northeastern Shandong province, according to Chinese media reports.
In July 2020, Wise Road entered into a joint venture with ASM Pacific Technology, a major provider of equipment for semiconductor packaging and assembly, to build a factory in Chuzhou, a city in eastern Anhui province. In the same month, the fund signed a contract with Germany’s Siemens to acquire its Huba Control unit, a 70-year-old sensor manufacturing company, and relocated the project in Chengdu, capital of southwest Sichuan province.
Both Wise Road Capital and JAC Capital are part of a Beijing-based group called the Financial Information Technology Alliance, a non-profit organisation established in 2016 with 23 founding members that include Chinese tech firms, banks and investment institutions.
Members include investment bank CCB International, as well as Chinese chip packaging firm Jiangsu Changjiang Electronics Technology and the country’s foundry champion Semiconductor International Manufacturing Corp.
The chairman of the alliance, Li Bin, is also the founder of Wise Road. There is little public information about Li, but there is evidence that he is being courted by provincial officials looking for semiconductor investments.
In March, Wang Qingxian, the provincial governor of Anhui, had a work meeting with Li and asked the fund manager to introduce semiconductor, mobile technology and smart manufacturing projects to the province, according to a local government statement.
Analysts said China’s desire to acquire overseas semiconductor facilities may have its limits because Washington, through CFIUS, is keeping a close eye on Chinese deals to prevent Beijing from gaining access to the most advanced technologies.
“If it is about sensitive technologies, the US can find ways to block the deal,” said William Deng, an analyst at UBS in Hong Kong. “One shouldn’t be too excited about China’s overseas acquisitions.”
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