The government-controlled Japan Investment Corporation ( JIC ) will acquire TOKYO – JSR, one of the top two photoresist manufacturers in the semiconductor industry, and delist it from the Tokyo Stock Exchange.
As Japan tightens its ties with US export restrictions on high-end chips and chip-making technology to China, the proper state purchase, valued at 909.3 billion yen( US$ 6.4 billion ), was announced on June 26.
Crucial elements in chip-making supply chains are photoresists, the light-sensitive materials used to type circuit patterns on silicon and other types of chips during the photo-lithographic approach.
A 20-day sweet give period should start by late December after receiving regulatory authorization, with JIC acquiring 100 % possession of JSR in first 2024. Mizuho Bank and the Development Bank of Japan may provide financing for the transaction.
Due to the bargain, investors’ preferences, information disclosure required to analyze market trends, and completely market economics are most likely to suffer.
At the same time, from Tokyo’s perspective, the possibility of a foreign invasion and” environmentalist” owners interfering in Chinese management decisions will be eliminated.
Semiconductors have been identified as a crucial strategic industry by the government as part of Prime Minister Fumio Kishida’s” fresh capitalism” initiative, an ambiguous strategy to promote economic growth, raise wages, and more fairly spread wealth.
In a statement to reporters last month, Kishida stated that” securing an industrial center of transistor technology in Japan is essential from both the standpoints of renewables and economic security.”
The sweet offer, according to JIC,” is designed to help JSR to smoothly and quickly market its bold, moderate – to long-term strategic investments without being constrained by the short – term impact on business efficiency ,” or without financial market discipline.
Additionally, the buy-out will allow JSR to” flexibly pursue structural reforms and restructuring” and” provide an opportunity for industry reorganization and private fund acquisition to strengthen the international competitiveness of[ Japan’s ] semiconductor materials industry ,” according to a company statement. & nbsp,
The transaction, in the opinion of JSR management,” reinforces our solid business foundation and accelerates green growth, and it’s the best strategic option at this point” for allJSR stakeholders.
What then is the real motivation behind the offer? Nearly 90 % of the global market for semiconductor photoresists is controlled by JSR, its main rival Tokyo Ohka Kogyo( TOK ), and three other Japanese companies, Shin – Etsu Chemical, Fujifilm, and Sumitomo Chemical.
The market share of JSR is already predicted to be between 30 and 35 %, while TOK’s share is probably only a few percentage points lower. This industry does not clearly need government support given its prominent position on the global market.
Additionally, JSR doesn’t seem to require any additional funding that JIC might be able to offer. The business has a strong balance sheet, and internal resources are used to cover cash expenditures. In the financial year that ends on March 2024, control hopes to achieve a 9.5 % operating margin.
However, a deep-pocked and like-minded state owner would be of great assistance if” strong strategic investments” entails doubling capital spending.
Mitsunobu Koshiba, chairman emeritus of JSR and an outside chairman of Rapidus, the business founded in 2022 to offer superior logic chip factory solutions in Japan, seems to be one website between federal policy and the buy-out. By 2027, Rapidus, which collaborates with IBM, hopes to achieve mass production at two nanometers( 2nm ).
The” Post 5G Information and Communication Systems Infrastructure Enhancement R & amp, D Project,” run by Japan’s state New Energy and Industrial Technology Development Organization ( NEDO ), also includes Rapidus. Additionally, it collaborates with IMEC, a global nanoelectronics R & amp, D center with its headquarters in Belgium.
JSR is the owner of Inpria, an Oregon-based business that specializes in metal-oxide photoresists( the majority are made of plastics ). By the end of the decade, Inpria‘s resists, which were created especially for EUV printing, are anticipated to pave the way for chip generation at 1nm and smaller.
The advanced cards will be essential to proper industries like quantum computing, automatic vehicles, neuro-morphic devices, and 6G telecommunications. JSR and Inpria collaborate attentively with leading device manufacturers like Intel, TSMC, Samsung Electronics, and SK Hynix.
JSR is more than just a producer of silicon materials. Additionally, compared to 29 % for semiconductor materials, its life sciences division is anticipated to produce 32 % of sales this fiscal year. Electronic components like display, integrated circuit packaging, and plastics are expected to make 11 % of the contribution, followed by other materials of 4 %.
The life sciences industry, which is centered on biopharmaceuticals, needs to invest in potential development, product development, advertising, and operational effectiveness. For a portion of JSR’s capital expenditure and management attention, it competes with electrical materials.
JSR control anticipates that JIC will help” a thorough expansion strategy and action plan” for the life sciences. It could be argued that dividing JSR into two companies, which would be easier to do without open shareholder disputes, would provide the most beneficial support.
An impartial electronic materials company could focus on overcoming obstacles from smaller Chinese, South Korean, American, German, and fresh Chinese competitors who are all vying for a larger market share while also staying ahead of TOK in photoresists.
The tender offer will be made for 4, 350 yen($ 30 ), a 34.5 % premium over the asking price just before the buy-out was revealed, and only 4 % below the all-time high set in December 2021.
JSR closed at 4, 110 hankering on June 30, a 27 % increase over the news of the deal. Over the same five days, TOK’s share price increased by 9 %.
For TOK or other material manufacturers, an intense rival with preferential financing would not be great news, but investors may soon have few options.
On the other hand, owners are currently profitable. As one trader stated in a private conversation, he was happy to accept the profit even though his account did not purchase JSR in anticipation of repurchase.
Policy-driven investments was, of course, refuse, as it did in the cases of Japan Display, which stood no prospect against the South Koreans and Chinese, and Elpida, a DRAM manufacturer that Micron bought for incredibly low prices after Chinese banks failed.
Or, coverage success may result in the acquisition and delisting of additional Chinese tech companies, which could be advantageous to current shareholders.
Eric Johnson, Director of JSR, referred to JIC as a” natural source of capital” while speaking on camera for investors and the media. However, the Development Bank of Japan and 24 major private sector companies make up the remaining 96.5 % of JIC, which is owned by the Chinese state.
According to a company speech, JIC defines its function as follows:” We, Japan Investment Corporation, provide risk investment to fields in which most secret owners are reluctant to invest.” While enhancing global fight, we want to encourage business and industry move.
Reluctance to spend, however, does not appear to be an issue in this instance. According to the bank’s website, JSR is followed by experts from 19 stocks companies. 54 % of its shares are owned by foreign buyers.
Additionally, JSR anticipates a transitional buy-out, stating in its” Highlights of the Transaction” statement that the” plan” will” relist” once continuous growth and expansion in corporate value is realized.
This suggests that JSR and JIC anticipate a dangerous and energetic time when the stock market’s short-termism will make it more difficult for the company to keep up with developments in the device market.
That’s in line with the viewpoint of JIC CEO Keisuke Yokoo.
Today, development is moving quickly across the globe, catalyzing contests and business restructuring that cross standard industrial and organizational boundaries, according to Yokoo. We are therefore dealing with a powerful change in the dynamic environment and the structure of business, he said.
However, only time will tell if JSR’s buy-out and withdrawal is the best course of action to safeguard both the future of the business and the objectives of Japan as a whole.
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