Japan's JIC sees M&A options in chipmaking niches after $6.4 bln JSR buyout

JSR

27/06/2023 05:00

By Makiko Yamazaki and Ritsuko Shimizu
       TOKYO, June 27 (Reuters) - State-backed Japan Investment
Corp (JIC) sees potential for more mergers and acquisitions in
high-end corners of the chipmaking industry following its
planned $6.4 billion buyout of materials maker JSR  4185.T , the
head of its private equity arm said.
    The comments from JIC Capital CEO Shogo Ikeuchi signal a
potential shakeup of an industry critical to everything from
smartphones to artificial intelligence that is a lynchpin of
economic security in the world's third-largest economy.
    "We see potential in some speciality materials markets where
JSR can win dominant positions by combining with other materials
makers," Ikeuchi said in an interview.
    "We believe that we can boost Japanese chip materials
makers' global competitiveness by spurring industry
consolidation," he added.
    Ikeuchi said there are broad deal options because JSR's
products are diverse. The company is involved in chipmaking from
the front-end wafer fabrication process to the back-end chip
packaging process.
    The JSR deal is the latest of a series of increasingly
muscular government steps to try to regain Japan's lead in
advanced semiconductor production and maintain its edge as a
maker of materials and tools used in their manufacture.
    JSR is a top supplier of photoresists, which are
light-sensitive chemicals used to etch patterns on wafers.
    Ikeuchi also signalled JIC's appetite for more deals in
chip-related industries, saying that its investment decisions
were aligned with the trade ministry's policy and the
semiconductor industry was critical for Japan.
    He also cited chemicals, automotive components and
healthcare as sectors where the government-backed fund could
play a key role to foster consolidation.
    In the chemicals industry, for example, Japan has "too many
players making similar products that were once competitive but
are now commoditised," Ikeuchi said. "Japanese companies will
have a hard time ahead unless a certain degree of consolidation
takes place."
    JIC, overseen by the powerful trade ministry, was set up in
2018 to invest in Japanese companies to boost the nation's
competitiveness.
    While its predecessor, the Innovation Network Corp of Japan
(INCJ), largely focused on cash-strapped or ailing firms, JIC
has so far mostly invested in startups and venture capital
funds.
    Ikeuchi said JIC had revamped its investment decision making
process to better scrutinise downside risks and would stay away
from deals that just involved bailing out distressed companies.

 (Reporting by Makiko Yamazaki and Ritsuko Shimizu; Editing by
Jamie Freed)
 ((Makiko.Yamazaki@thomsonreuters.com; +81-3-4563-2805;))