A US chipmaker’s attempt to acquire a peer with a valuable Chinese affiliate has spurred concern in Beijing, as tensions between the world’s two biggest economies threaten to disrupt the global tech supply chain.
China’s antitrust regulator is closely monitoring Diodes Inc’s proposed US$428 million takeover of Lite-On Semiconductor Corp (敦南科技), responding to complaints that a deal would deliver the Taiwanese company’s Shanghai-based affiliate On-Bright Electronics Inc (昂寶) into US hands, according to a person familiar with the matter.
China’s State Administration for Market Regulation is heeding warnings from multiple industry organizations about the acquisition and could consider asking the Chinese assets to be excluded from the deal, said the person, asking not to be identified talking about sensitive matters.
The unusual attention accorded On-Bright — a Chinese maker of chipsets for power management that is listed in Taipei and has a market value of NT$9.88 billion (US$323.93 million) — reflects growing scrutiny of US merger and acquisition (M&A) efforts in China.
Regulators might be responding to a string of rejections that have foiled Chinese efforts to acquire US companies because of national security concerns, including Tsinghua Unigroup Ltd’s (清華紫光) abortive effort to lead a buyout of Western Digital Corp in 2016.
It underscores Beijing’s concern about an overwhelming reliance on US-designed semiconductors, which has spurred a nationwide effort to develop homegrown chip technology.
Plano, Texas-based Diodes in August announced its intention to acquire Lite-On Semiconductor, which holds about one-third of the Chinese firm, filings show.
The deal was expected to close in April.
A Lite-On Semiconductor representative said Diodes had submitted its application to Beijing for antitrust review in mid-September.
Diodes did not reply to e-mails requesting comment.
An On-Bright representative in Taipei said the company has not heard that it would need to be excluded from the deal.
One of the red flags was raised by Mobile China Alliance, an influential industrial association that represents Chinese smartphone suppliers, which had closely worked with regulators on multiple M&A cases, including Qualcomm Inc’s failed US$44 billion bid for NXP Semiconductors NV last year.
“If the Chinese government’s antitrust or national security review system doesn’t stop the deal, a great semiconductor company that China spent much effort on will end up becoming an American company,” alliance secretary-general Wang Yanhui (王延輝) wrote in an open letter last week.
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