In a significant development for Japan’s chip industry, semiconductor materials manufacturer JSR Corp has announced its agreement to be acquired by a government-backed fund, Japan Investment Corp (JIC), for approximately 909.3 billion yen ($6.35 billion). This deal underscores the growing involvement of the state in revitalizing Japan’s chip production capabilities and maintaining its position as a leading provider of materials and tools for chip manufacturing. This report examines the details of the deal, its implications for the industry, and the potential outcomes for JSR and the Japanese chip sector.
Overview of the Deal
Under the agreement, JIC plans to launch a tender offer in late December, offering 4,350 yen per share to acquire JSR and take the company private. Mizuho Bank and the government-backed Development Bank of Japan (DBJ) will provide financing for the deal. JSR initiated discussions with JIC in November, highlighting the need for consolidation among domestic materials makers to enhance competitiveness. Recognizing JIC’s ability to provide substantial long-term capital, JSR viewed this deal as an opportunity to invest in advanced chip manufacturing capabilities.
Government Support and Industry Trends
Japan’s government has been taking proactive steps to reclaim its leadership in advanced chip production. The move to acquire JSR aligns with the government’s strategy of fostering a robust chip supply chain. As tensions between the U.S. and China escalate, with the U.S. administration prioritizing domestic chip manufacturing, Japan, along with the Netherlands, has joined in restricting exports of chipmaking tools to China. This underscores the increasing geopolitical importance of the semiconductor industry and the efforts of countries to protect their technological edge.
JSR’s Market Position and Potential Benefits
JSR is a key supplier of photoresists, crucial chemicals used in etching patterns on wafers. The company’s expertise in this field gives Japan a competitive advantage, as other countries, including China, are yet to develop similar technologies. With a 39% market share in the ArF photoresist market, JSR serves major clients such as Samsung Electronics, Taiwan Semiconductor Manufacturing Co, and Micron Technology. The acquisition by JIC is expected to enable JSR to invest in advanced materials, particularly in the growing extreme ultraviolet (EUV) photoresist market.
Implications for the Industry and Market Reaction
News of the deal has already had a positive impact on the stock market, with JSR’s shares rising by 21.7% ahead of the official announcement. Tokyo Ohka Kogyo, a peer company, saw its shares surge by 10%, while Sumitomo Chemical and Shin-Etsu Chemical experienced a 2% increase each. The market speculates that funds may flow to other small and medium-sized materials makers, potentially strengthening the overall chip supply chain in Japan. However, it is important to note that the acquisition of a profitable company like JSR, which has already undergone restructuring, may attract criticism for potential overreach by the government.
Future Investment and Challenges
To meet the growing global demand for chips, JSR needs substantial investment in production capacity and the development of materials for advanced chip manufacturing. While Japan has a mixed track record when it comes to intervening in struggling industries, this deal signifies a government commitment to supporting the growth and competitiveness of the chip sector. JIC’s expansion of its buyout fund to 900 billion yen in November 2022 indicates a broader intention to play a more significant role in the industry beyond the JSR acquisition.
Japan’s investment in JSR through the government-backed fund JIC represents a strategic move to reinforce the country’s chip supply chain and maintain its global edge in chip production. By acquiring JSR, Japan
aims to enhance its capabilities in advanced materials, particularly in the photoresist market, where it currently holds a monopoly. While this deal signifies a more substantial state role in the industry, potential challenges and criticisms remain, particularly concerning government intervention and the long-term effectiveness of such measures. Nonetheless, the acquisition of JSR marks an important step in Japan’s efforts to revive and strengthen its chip industry.
