Advanced Semiconductor Engineering Inc, which claims to be the world’s largest independent provider of chip packaging and testing services, has agreed to a buyout, which values the Taiwan-based company at $5.4bn, by a private equity consortium led by The Carlyle Group.
The deal confirms huge interest by private equity in the chip sector, and follows the $17.6bn acquisition of Freescale Semiconductor Inc and the deal in August when Philips sold an 80.1% stake in its semiconductor arm, since renamed NXT, to a private equity group for 8.3bn euros ($10.7bn).
ASE said talks with the consortium have not been completed and consequently there is no assurance that an offer will ultimately be made or on what terms. However, CEO Jason Chang has joined the consortium and has agreed to put the 18.4% stake he controls into the holding company making the bid.
An increasing tendency of chip manufacturers to outsource packing and testing where the raw semiconductor is sliced into individual dies and prepared and tested for end users has helped ASE to steadily grow business. Higher raw material costs last year resulted in a fall of 16.2% in net income to TWD 6.9bn ($177.3m) on revenue that rose 11.7% to TWD 85.2bn ($2.5bn).
Customers of the New York stock exchange-quoted company include many of the big names in the chip business including Freescale, IBM, Philips, Qualcomm, and STMicroelectronics.
Meanwhile, which companies the private funds will pursue next in the semiconductor industry is currently the subject of speculation around the world’s stock markets. Private equity is targeting chip firms because they are not highly rated on stocks markets, which are risk-averse and uncomfortable with the huge swings in demand for semiconductors. But freed from the gaze of analysts, companies under private equity ownership can endure short-term financial pain to reach their long-term financial objectives.