Mon, Jun 20, 2016 - Page 8 News List

EDITORIAL: Quality firms and foreign investors

Fresh merger and acquisition deals continue to grab headlines on the back of cheap cash around the world. However, Hermes Microvision Inc’s decision to sell itself to Dutch semiconductor equipment maker ASML Holding NV has drawn mixed reactions in Taiwan.

While investors welcomed the deal, sending Hermes Microvision shares up by the daily maximum of 10 percent, the move has triggered debate about how the government should respond to the implications of such technology buyouts.

Hsinchu-based Hermes Microvision on Thursday said that it would sell itself to ASML in a deal worth NT$100 billion (US$3.09 billion), and would become a 100 percent subsidiary of the Veldhoven-based firm once the transaction closes in the fourth quarter.

ASML is the world’s largest lithography system provider for the semiconductor industry, with sales of US$7.1 billion last year. Hermes Microvision’s leadership in e-beam inspection technology is also indisputable, with it posting NT$6.65 billion in revenue last year. Through the deal, the Taiwanese firm expects to gain more research and development resources and enhance yields for its customers.

The deal comes at a time when major semiconductor equipment manufacturers are trying to become full-service providers to help their customers extend Moore’s Law and overcome challenges in process node migration.

For example, in October last year, semiconductor equipment maker Lam Research Corp said it would buy rival KLA-Tencor Corp, in a deal valued at about US$10.6 billion, to help customers meet the market demands of chips with lower power, higher performance and smaller form factors.

Analysts have high hopes of synergy between Hermes Microvision and ASML, viewing the consolidation as a sensible and necessary step to expedite yield enhancement for nodes smaller than 10 nanometers, 3D integration and the rollout of extreme ultraviolet lithography masks. The government has welcomed the deal, with the Ministry of Economic Affairs saying that the two firms can offer integrated solutions to customers, which would benefit the local semiconductor industry.

Certainly, the timing of the deal is good. If Hermes Microvision’s management was not ready to accept an outright takeover and wanted to wait, the company might lose leverage in negotiations with ASML as its sales growth slows. The deal also highlights that there are good companies in Taiwan and foreign buyers do not want to miss any quality targets.

However, the deal has other implications for Taiwan, a nation that has emerged as a global technology powerhouses thanks to a skilled workforce and government support. For example, other small or medium-sized tech firms focused on the premium niche market might follow suit in looking to bigger foreign rivals to expand their business scale, enhance research and development, and increase competitiveness.

There are also concerns about the dynamics of the nation’s capital markets and the future momentum of Taiwan’s bourse. The rationale behind this argument is that since Hermes Microvision — the nation’s second-most expensive stock, which traded at NT$1,300 per share on Friday — is to delist in Taiwan after the buyout, the move might signal that the firm is seeking an alternative way to fund operations and the delisting is likely to have a negative impact on the local bourse’s trading volume and capitalization.

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