Private equity funds see opportunity in Japanese chipmakers

by Dr. Paula Doe, Contributing Editor

Japanese chipmakers may now look compelling enough to private equity funds to overcome longstanding issues with acquisitions in Japan.

The Japanese companies are significantly cheaper than the rest of the industry, noted iSuppli Japan VP Akira Minamikawa, in an article in SST partner Nikkei Microdevices. And there’s plenty of room for improvement, he argued, since the Japanese makers typically have an excess of fabs — twice as many on average as companies based elsewhere in the world — and too many of those fabs are old 125mm ones, instead of new 300mm ones.

Investment funds are now interested in the semiconductor sector because it’s become a relatively stable business, and technology and manufacturing aren’t so important anymore, said Masato Marumo, managing director of The Carlyle Group in Tokyo, in a Q&A with Nikkei Microdevices. The private equity group recently acquired assembly and packaging house Nakaya Microdevices (after a failed pursuit of Taiwan packaging house Advanced Semiconductor Engineering), and funded the management buyout of Toshiba Ceramics. “An investment fund can now get results in the semiconductor sector by making the right management decisions,” said Marumo. “Before, results largely depended on technology and manufacturing skills, where investment funds don’t play.”

“It’s especially true in Japan that the chip industry’s problems are management problems,” he continued. “Even if it’s clear what they need to do, many managements can’t move decisively to make changes […]. And as losses continue, there’s less room to maneuver. External capital can be a solution.” — P.D.


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