A GlobalWafers-Siltronic merger after $4.5-billion deal will create global giant

03, Dec. 2020

Photo by Christian Wiediger on Unsplash
Photo by Christian Wiediger on Unsplash

By Gloria Cho and Celine Chen

TAIPEI, NNA – Eyeing global expansion, Taiwanese semiconductor maker GlobalWafers Co. is in the last leg of talks to take over German rival Siltronic AG for 3.75 billion euros ($4.5 billion) in a deal which could be wrapped up as early as next week.

If the planned merger succeeds and skirts antitrust scrutiny, GlobalWafers will become one of the top largest semiconductor companies in the world in terms of revenue. Currently, it is in the third spot.

Ranked as one of the global semiconductor market leaders, Siltronic is recognized as a technology leader in the design and production of highly specialized silicon wafers.

With their combined portfolios of advanced products, GlobalWafers will be in a much stronger position to manoeuvre in the highly competitive though booming industry, said analysts.

If the deal comes to fruition, GlobalWafers’ current global share of 17 percent will soar to over 30 percent, overtaking Japan's Sumco Corp.'s 25 percent, and tailing market leader Shin-Etsu Chemical Co., also from Japan, which now reigns at 33 percent, according to data gleaned from Statista.

Bloomberg News quoted Richard Hsia, an analyst at Fubon Securities Investment Services, as saying a successful acquisition would help GlobalWafers surpass Shin-Etsu Chemical and Sumco, to become world number one by revenue, with a market share of 32 to 35 percent.

It is a smart move by GlobalWafers "as it will be able to expand capacity and market share through the merger,” Tseng Guan-wei, a TrendForce semiconductor analyst, told NNA.

"Thus, the company could increase its influence on future price negotiation as the price of silicon wafers may be shored up due to possible shortage of supply,” said Tseng.

In a statement, GlobalWafers said, "A combination of GlobalWafers and Siltronic would create a leading player in the industry with a comprehensive product portfolio that can offer technologically sophisticated products to all semiconductor customers globally."

It will also bring together their complementary skills and resources to invest in capacity expansion.

GlobalWafers' generous offer of 125 euros per share represents a premium of 48 percent above the volume-weighted average price at Xetra trading venue in Frankfurt over the past 90 days, said Siltronic in its announcement to investors in end-November.

Munich-based Siltronic considers the offer “attractive and appropriate,” while its largest shareholder Wacker Chemie AG has agreed to sell its 30.8 percent stake to GlobalWafers at the same price.

The offer price was the result of intensive negotiations over months between the two parties, revealed Siltronic, which is the world's fourth largest wafer material maker.

"The merger would create a leading player in the wafer industry with a comprehensive product portfolio that can offer technologically sophisticated products to all semiconductor customers," said Siltronic, adding that both parties had already agreed on key terms.

According to the "current status" of their agreement, Siltronic said it can pursue an "essentially unchanged business strategy" and will not close any production site or retrench staff in Germany for operational reasons until end-2024.

The deal is subject to regulatory approvals, and is expected to be announced in the second week of December, according to both companies.

The takeover offer is the latest in a succession of semiconductor deals this year that is set to break the record US$122 billion in chip acquisitions in 2016, according to Bloomberg. In October, Advanced Micro Devices Inc. announced a $35-billion takeover of Xilinx Inc. to add products to challenge leader Intel Corp.

GlobalWafers' takeover offer also marks the largest among its spate of acquisitions. They include semiconductor businesses of Japan’s Covalent Materials in 2012 and Denmark’s Topsil Semiconductor Material A/S in 2016. GlobalWafers also bought over America’s SunEdison Semiconductor Ltd. in 2016.

GlobalWafers, which counts Taiwan Semiconductor Manufacturing Co. and Samsung Electronics Co. among its clients, has forecast an optimistic 2021 for semiconductors, despite pandemic-caused disruptions and headwinds as well as trade tensions.

The company told investors in early November that it expects global silicon wafer shipments to increase 5 percent to 12.6 billion square inches (BSI) in 2021, and then 5.3 percent to 13.2 BSI in 2022.

Market research company SEMI reported in October that world silicon wafer shipments are set to grow 2.4 percent in 2020, with growth continuing in 2021 till they reach a record high in 2022.

"Silicon wafer shipments are recovering this year despite pressure from geopolitical tensions, the shifting global semiconductor supply chain and the COVID-19 pandemic," said Clark Tseng, director of Industry Research and Statistics at SEMI.

"With the pandemic accelerating digitization to transform businesses and their delivery of services worldwide, we expect continued growth over the next two years," he added.

Silicon wafers are the essential building material for semiconductors, which are vital components in virtually all electronic products, such as computers, smart phones and consumer electronics.

On capturing growth opportunities, Tseng of TrendForce urged wafer makers to step up the development of epitaxy technology as the availability of third-generation semiconductor components is still limited in the market. He suggested that they form strategic alliances and accumulate special patents to stay ahead of the race.

The rise in demand for LED lights has favored the silicon epitaxial wafer market substantially as it offers the best material for optimal performance. Also, silicon wafer’s role in car technology is fast improving, according to the latest Industry Research report.

This segment is expected to register a compound annual growth rate of 4.42 percent from 2019 to 2024, said Industry Research. Among the top players are GlobalWafers Japan Co., Siltronic, Sumco, MOSPEC Semiconductor Corp. and UniversityWafer, Inc.

Overall, the semiconductor competition is getting keener for established Taiwan players as big customers, such as Apple Inc., have started to design their own chips, while China rivals are muscling in to grab a share of the growing pie.

Majority-owned by Sino-American Silicon Products Inc., GlobalWafers reported 2019 revenue of about $2 billion. As for Siltronic, it made revenues of over $1.5 billion in 2019. The share prices of both companies have soared since the announcement of their planned merger.