Wingtech Technology: all you need to know about Chinese firm behind audacious US$3.6 billion takeover of Dutch chip maker Nexperia

Wingtech Technology: all you need to know about Chinese firm behind audacious US$3.6 billion takeover of Dutch chip maker Nexperia

Electronics manufacturer Wingtech Technology Co has seen its fortunes prosper since it was founded in 2006 amid China’s development as the world’s biggest smartphone market.

While it has become a major smartphone assembler for some of the country’s top brands, the Shanghai-listed company was not widely known outside the hi-tech industry.

That all changed when Wingtech disclosed in April that it looked to buy Netherlands-based chip maker Nexperia for US$3.6 billion. The Chinese firm received further attention last week after a regulatory filing showed that it plans to raise 4.63 billion yuan (US$666 million) by issuing 127.45 million shares, an amount that would not cover the total cost of its proposed acquisition.

Target company Nexperia is based in Nijmegen, a city in the Dutch province of Gelderland. This company was sold by parent NXP Semiconductors in 2016 to a consortium of Chinese investors, led by Beijing Jianguang Asset Management Co and Wise Road Capital.

Wingtech’s initiative to buy Nexperia shows how China remains focused on gaining self-sufficiency and parity in semiconductors, which go into and power everything from smartphones to smart speakers to the most advanced super computers and autonomous cars.

Apart from the challenge of raising funds to take over a large chip maker, Wingtech must also face the prospect of having that deal blocked by the US because of its trade war with China and the perception that Chinese hi-tech companies are threats to national security.

Here are a few things to know about Wingtech:

Obscure Chinese firm Wingtech Technology Co will buy Dutch chip maker Nexperia for US$3.6 billion

1. What is the business of Wingtech Technology Co?

Based in Jiaxing, a city in the eastern coastal province of Zhejiang, Wingtech claims to be the world’s largest smartphone original design manufacturer (ODM), with a 10 per cent global market share. As an ODM it designs and manufactures devices based on specifications of the client company, which sells the products under its brand.

Its biggest success to date is the line of low-cost Redmi smartphones that it produces for Xiaomi Corp. Other prominent Android smartphone clients are Huawei Technologies, Lenovo Group and Meizu.

Wingtech also produces notebook computers, virtual reality devices, networking equipment used in vehicles and so-called internet of things devices, among a range of electronics hardware.

The company, which had more than 3,500 employees as of the end of last year, provides services in more than 170 countries and territories. It operates research and development facilities in Jiaxing, Shanghai, Xi’an in the central province of Shaanxi and Shenzhen in the southern coastal province of Guangdong.

It reported a net loss of 177.3 million yuan against a revenue of 5.43 billion yuan for the first six months of this year.

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2. Who is the man behind Wingtech?

Zhang Xuezheng, 42, serves as the chairman and chief executive of Wingtech. Zhang is a former engineer-turned-executive who once worked for French-Italian chip maker STMicroelectronics and ZTE Corp, China’s second-largest telecommunications equipment manufacturer behind Huawei.

After working for those large corporations, he became a serial entrepreneur and developed motherboards for mobile phones. He sold these products in Huaqiangbei, a lively commercial district for electronics in Shenzhen, where he built his fortune that enabled him to establish Wingtech in 2006.

Under Wingtech’s proposed new share issue, Zhang and a company he set up in the Lhasa Economic and Technological Development Zone would remain the company’s biggest shareholder, with a combined 17.25 per cent stake. Yunnan Metropolitan Construction Investment Co, based in the capital of Kunming in southwestern Yunnan province, will be Wingtech’s second major shareholder with an 11.11 per cent share.

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3. How important is the Nexperia acquisition for Wingtech?

Buying Nexperia would help Wingtech develop its capabilities in designing, producing and packaging chips, which could be more advanced than what the likes of domestic hi-tech peers Huawei and ZTE have accomplished to date.

The acquisition also would provide certain synergies – in terms of customer base, technologies and products – from Nexperia’s top customers, including Apple, Samsung Electronics, Dell, HP and German engineering company Bosch, according to Wingtech’s regulatory filing.

More significantly, Wingtech would be able to help China become more self-sufficient in chips that are used by the country’s vast manufacturing supply chain.

China makes more than 90 per cent of the world’s smartphones, 65 per cent of personal computers and 67 per cent of smart televisions, according to estimates from Bernstein Research. But it has had to buy much of the chips that go into these devices from abroad. Annual chip imports by China have risen to more than US$200 billion since 2013 and reached US$260 billion last year.

China plans to raise funds of up to US$31.6 billion to fuel chip industry

Still, Wingtech’s proposed acquisition must face the scrutiny of the Committee on Foreign Investment in the United States, an inter-agency body that has turned down a number of major deals involving Chinese companies. Last year, the committee and US President Donald Trump blocked the acquisition of Lattice Semiconductor Corp by Chinese-owned Canyon Bridge Fund because of national security concerns.

In July, Qualcomm walked away from its US$44 billion bid for NXP Semiconductors after failing to secure antitrust approval from China, representing another high-profile casualty of the trade war between the US and China.

This article Wingtech Technology: all you need to know about Chinese firm behind audacious US$3.6 billion takeover of Dutch chip maker Nexperia first appeared on South China Morning Post

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