SAN FRANCISCOUnited Microelectronics Corp. will pay $285 million to acquire the 85 percent of Chinese foundry He Jian Technology Co. Ltd. that it did not already own, the company said Wednesday (April 29).
He Jian operates an 8-inch fab in Suzhou, China, with a monthly capacity of 41,000 wafers. According to UMC,
He Jian, established in 2001, has made inroads into the China market and has established strong relationships with local companies across the semiconductor supply chain. The company was profitable from 2005 to 2007, UMC said.
UMC already owned 15 percent of He Jian. In 2006,
then UMC Chairman Robert Tsao and Vice Chairman John Hsuan resigned from the company and were both indicted in Taiwan for allegedly making illegal investments in He Jian. UMC was later fined a reported NT$5 million (about $155,000) for violating restrictions against investment in China.
UMC said it was considering building its own fab in China, but chose to acquire He Jian instead because of the investment and time that would be required in a Greenfield fab. UMC said it believes that a production base in China is key to enhance shareholder value and increase the company's competitiveness.
Chinese silicon foundry companies have struggled in recent years, with analysts believing that they will undergo mass consolidation in 2009. Some analysts have questioned whether China will live up to its commitment to become a global semiconductor manufacturing power.
Last November, Beijing-based Datang Telecom Technology & Industry Holdings Co. Ltd. acquired for $172 million a 16.6 percent stake in Semiconductor Manufacturing International Corp., China's largest foundry company.
Earlier Wednesday, UMC reported that first quarter sales declined 41.5 percent sequentially as capacity utilization fell to 30 percent. But the company said recent orders point to strong second quarter demand.