Sat, Apr 14, 2007 - Page 11 News List

Carlyle plans Japanese investments

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Carlyle Group, owner of the biggest buyout fund dedicated to Japan, plans to seek more investments in the nation's semiconductor industry after it acquired Toshiba Corp's silicon-wafer making unit last year.

"We would like to continue investing in the Japanese chip industry," limiting the focus to one or two companies, Masato Marumo, a Carlyle managing director, said at the Semiconductor Executive Forum in Tokyo this week. "With a lot of its cyclical volatility gone, the industry offers a favorable environment."

Semiconductors are garnering the most attention in the technology industry from private equity funds, after a Carlyle-led group won a US$17.6 billion bid for Freescale Semiconductor Inc last year. The fund, which participated in more than US$25 billion of technology-related takeovers last year, is also seeking larger companies in Japan's electronics industry.

"The likelihood of mergers and acquisitions in the chip gear industry is increasing," said Yoshihide Ohtake at Shinko Securities Co, Tokyo. Private equity funds may act as catalysts for change in the industry that's typically been averse to takeovers, the analyst said.

Washington-based Carlyle and Unison Capital Inc last October led a US$1.2 billion management buyout of Toshiba Ceramics, a silicon-wafer producer. The fund is also in talks to buy Taiwan's Advanced Semiconductor Engineering Inc (ASE, 日月光半導體).

Carlyle wants to invest in an area of chip production not covered by previous purchases, to avoid competition between its assets, Marumo said, without naming any companies. In his presentation, he gave examples of Toshiba Ceramics products used in the chip-making equipment of Canon Inc, Tokyo Electron Ltd and Hitachi Kokusai Electric Inc.

Freescale is an Austin, Texas-based maker of chips for cars and mobile phones. ASE packages chips in plastic or ceramic housings and adds connectors so they can be assembled in computers, game consoles, handsets and other electronic instruments.

Carlyle, which raised ?215.6 billion (US$1.8 billion) for a Japan fund in July, plans to invest about ?50 billion this year, Tamotsu Adachi, head of operations in the country, said in December. That would equal the firm's total investment in Japan in the five years since first opening an office in 2000.

Japan's longest postwar economic expansion is spurring the nation's companies to sell underperforming units and improve competitiveness. Leveraged and management buyouts in Japan more than doubled to US$9 billion last year, according to data compiled by Bloomberg.

The country is home to half of the world's 10 biggest chip-equipment makers, according to Gartner Inc.

Tokyo Electron is the world's second-largest equipment manufacturer, after Applied Materials Inc. Advantest Corp is the world's largest maker of chip-testing machines and is the industry's sixth biggest manufacturer, according to the report.

Nikon Corp is competing with Veldhoven, Netherlands-based ASML Holding NV for the top spot in the market for steppers, machines that burn circuits into silicon wafers.

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