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Can reshape the semiconductor industry, private equity funds

In Electronic Infomation Category: R | on January   7, 2011

From two years ago, the "hot" to todays "doors to cooling", the global economic recession coupled with the seasonal cycle of the semiconductor industry, to private equity funds have the attitude of the semiconductor industry, 180o of the turn.

2006 Nian 9 months, from the Motorola chip companies independent of Freescale by Blackstone Investment Group, Carlyle Group, Permira Funds and LTC3716EG datasheet and Texas Pacific Group and LTC3716EG price and other private equity consortium for 17.6 billion fund to buy.

Almost the same time, NXP (formerly Philips Semiconductor) was KohlbergKravisRoberts & Co. (KKR), Bain Capital (BainCapital), Silver Lake Partners (SilverLakePartners) and LTC3716EG suppliers and Abacus Partnership (ApaxandAlpInvestPartnersN.V. ) investment in private equity consortium consisting of 11.3 billion to buy the 80.1% of the shares.

"Accurate, from the second half of 2007, private equity activities in the semiconductor industry has no longer active." Bain Investment Advisory (China) Limited, Jing HUANG say so.

Perhaps, to private equity funds warm gradually cooling down the semiconductor industry, the reasons include, Freescale, NXP and other well-known semiconductor companies do not succeed as quickly as expected, and they in 2006 and 2007 was the very eyes of private equity funds shining star.

In the Wall Street private equity fund known as "Barbarians at the Gate" and said they are shrewd businessmen capital to quick profits for the purpose of merely standing in the "door", "barbarians" of participation, can whether to save the semiconductor industry?

Not successful "role model" Freescale and NXP

more than just the acquisition of private equity boom in the semiconductor industry are two major waves. Back in August 2005, Agilents semiconductor components sector was 2.66 billion private equity consortium acquired and renamed Avago (Avago) company.

In addition, IC Star STATS ChipPAC Ltd. (STATSChipPAC, STATS), Toshiba Ceramics Co., Ltd., Singapore, United Technologies Corporation (UnitedTestandAssemblyCenter, UTAC) and other companies are involved in private equity transactions among the important .

The worlds largest semiconductor packaging and testing companies - Taiwans ASE Group, STMicroelectronics, Advanced Semiconductor, Intel and the Ministry of NOR flash memory semiconductor companies such as SMIC and private funds have repeatedly heard "ogle" in the scandal.

But in fact, the semiconductor company after the acquisition by private equity funds, and not, as can be expected as the rapid growth, most companies are still struggling in the mire of losses.

The fourth quarter of 2006, Freescale began to steep losses, and this situation continued, to the third quarter of 2008, Freescales loss of up to $ 3,370,000,000, the fourth-quarter loss of $ 4,000,000,000 2008 full-year losses of up to 80 billion U.S. dollars. Freescale forced to withdraw from the field of mobile phone chips, and announced the layoff of 10%.

Europes third-largest chip maker NXP situation is not optimistic. September 2008, NXP announced that by 2010, plans to cut 15% of the scale layoffs of about 4,500 people, also shut down several plants. And from January 1, 2009 onwards, NXP regulatory committee appointed to succeed Chief Executive Officer RichardL.Clemmer FransvanHouten..

2008 Nian 4 months, NXP 80% of its stake in the wireless business and STMicroelectronics merge into a new company, and received 15.5 billion U.S. dollars, in July, NXP tuner module operations in turn the metal to separate and a joint venture with Thomson.

ISuppli analyst Gu Wenjun of Chinas semiconductor industry, said more of the current semiconductor industry is the industrys problems, rather than individual enterprises. iSupplis survey data show that in 2008 the global semiconductor industry growth rate of -2%, to 2009, this figure will decline further to -9.4%.

Jingsheng Huang emotion: "According to the semiconductor industry, its seasonal pattern, 2006,2007 trough of the semiconductor industry, 2008 and 2010 the semiconductor industry from the bottom of the climax stage, now because of the global economic recession, this cycle is broken. "

"It is difficult to distinguish in this round of the semiconductor business development process, how much weight is promoted from the role of private equity funds, there are cycles and what factor is the industry problem of the economic environment." Senior experts in the semiconductor industry, a great health said. The role of private equity funds


Private equity funds on the development of the role of business and industry, the industry has always had different views. In 2007, the Blackstone consortiums acquisition of the near completion of the Freescale Freescale CEO, said in a forum MichelMayer, private equity funds on the integration of the semiconductor industry is a positive driving force.

He believes that, in general, private equity company involved in a longer period and want resold or re-packaging market is a prerequisite for the acquisition of operating performance is good. In addition, private equity funds are more focused on leading companies help speed up the decision-making progress and competitiveness of the company, so the involvement of private equity funds will accelerate the semiconductor industry to create a new order.

Jingsheng Huang has similar views on this. He pointed out that private equity acquisition of the semiconductor industry, many cases, these companies are in bankruptcy, the involvement of private equity funds to help these enterprises. More importantly, from the original parent company, a division into a separate company, strategy is more focused, but also to play a greater potential.

Voice doubts that a more serious problem is that these are private equity fund to support companies really have an incentive to invest in R & D and innovation in product development, TIs chief scientist DennisBuss pointed out that the "point of view has been private equity fund with semiconductor companies stifling innovation, private equity owners who have no interest in investing in long-term research and development. "

Freescale spokesman denied that, he said that since the privatization of Freescale has maintained a 1.2 billion a year R & D investment, even if the turnover in 2007 dropped by 10% is still so . "I feel like the market may lead people to chip companies that their businesses are more willing than the privatization of the above concerns in the innovation, but it is not necessarily so." A spokesman for NXP

on the "First Financial Daily" said NXPs new investors are more willing than ever for investors to invest in technology development.

"After a reorganization, NXP will be sales of 16% to 17% investment in research and development. This is consistent with other leading semiconductor companies, in automotive electronics and intelligent recognition of the past few years our R & D investment has been more than doubled; in the multi-market semiconductors, R & D investment increased by 50 %."

Whether the extent to which private equity funds to help the semiconductor business? Jingsheng Huang said, the different private equity funds in this matter will take a different approach. To Bain Capital, for example, the Councils proactive initiative to explore the management and business development strategy and will strictly examine the direction and timely correction.

NXP, said, "Our ownership structure is still given us a very large degree of freedom in two years we have completed four acquisitions, and we can move quickly. Our senior management team that is more favorable to the company approach to operations and management, and in this respect have a greater degree of freedom. "

"The acquisition by private equity and real estate knowledge, relationships, and help, we have been able to use some new resources." NXP spokesman said the above.

BDA analyst Tommy that, through changes in the same enterprise market share, better reflect changes in the competitiveness of the enterprises themselves. NXP data show that in the past three years, NXPs leadership position was strengthened: in about 75% of the sub-product categories, a leader, before the ratio was 66%.

Jingsheng Huang also pointed out, the view that private equity companies after the acquisition will be more "short-sighted," which is actually a misunderstanding. "Business by the privatization of the company into a publicly listed company, do not have to meet the quarterly earnings release, the general private equity portfolio companies sold again only after 5 years, compared to listed companies, these companies pay more attention to long-term competitiveness. "

But this view can be recognition of the semiconductor business is hard to say. According to Gu Wenjun learned from the semiconductor industry conditions, many semiconductor companies still believe that private equity or venture capital funds mainly for the purpose of making quick money, access to investment at the cost of giving up the autonomy of enterprises and the cultivation of long-term competitiveness. Have been facing financial difficulties for the semiconductor industry, the acceptance of private equity or venture funds in hand has always been a dilemma.

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