Japan Buys Out JSR As It Drives Chip Equipment Sector

The Japanese government is to take over profitable semiconductor equipment maker JSR in a surprise move, as the country seeks to take advantage of increasingly strained relations between the US and China to bolster its high-end chip industry.

JSR said on Monday it had agreed to a multibillion-dollar offer from state-backed fund Japan Investment Corp (JIC), overseen by the country’s trade ministry.

JIC plans to launch a tender offer in December valuing JSR at 4,350 yen per share, a 35 percent premium on Friday’s closing price, to take the company private.

Funding is to be provided by Mizuho Bank and the government-backed Bank of Japan. Mizuho is already one of JSR’s top 10 biggest shareholders.

Consolidation

JSR’s largest shareholder, US activist fund ValueAct, said it supported the deal.

The company’s shares rose by their daily limit of 22 percent ahead of the announcement, following a leak to local media.

JSR chief executive told a news conference there was a “significant” opportunity for efficiency gains in Japan’s chip equipment sector as “there are a lot of us and all of us are spending money redundantly”, bolstering expectations of consolidation.

Johnson said he aims to relist JSR in five to seven years.

Semiconductor materials

Tokyo-based JSR has a 30 percent global share in photoresists, chemicals used in printing circuit designs on chip wafers, a technology in which Japan remains a leader.

The firm’s customers include the biggest names in the chip field, including Intel, Samsung and Taiwan’s TSMC.

In the past the Japanese government has backed significant companies when they were struggling, but buying out a profitable firm is a significant change in strategy, and industry watchers said the move was unlikely to be the last of its kind.

The US last October moved to restrict exports of high-end chips and chipmaking equipment to China, in the meantime passing a multibillion-dollar funding law to bolster its own domestic chip industry.

US-China tensions

It brought in allies the Netherlands and Japan to pass restrictions of their own on Chinese chip equipment exports.

In recent months Japan has been making use of the pressure on China to try to regain the lead it once held in the 1980s in the semiconductor field, a position later ceded to the US and then to Taiwan and South Korea.