United Microelectronics Corp. (UMC), the second largest contract chipmaker in Taiwan, has agreed to set up a strategic partnership with integrated circuit packaging and testing services provider Chipbond Technology Corp. through a share swap.
UMC announced the deal Friday evening, saying it will use one of its common shares to exchange for 0.87 common shares of Chipbond. After the share swap, UMC is expected to take a 9.09 percent stake in Chipbond, while the IC packaging and testing firm will take a 0.62 percent stake in the contract chipmaker.
As a result of the deal, UMC will become the largest shareholder of the IC packaging and testing services provider, it said.
The chipmaker said the two companies’ boards of directors have approved the deal, but it did not disclose when the share swap will be completed.
As part of the agreement, UMC will issue 61.11 million new shares, and along with 16.08 million UMC shares held by its wholly owned Fortune Venture Capital, the chipmaker will make an exchange to receive 67.15 million new shares to be issued by Chipbond.
Based on Chipbond’s closing share price of NT$81.10 (US$2.93) on the over-the-counter market Friday, which was up 2.4 percent, the share swap will be valued at about NT$5.45 billion. UMC shares soared 9.38 percent to end at NT$70 on the Taiwan Stock Exchange Friday.
Market analysts said the move for UMC, one of the important upstream wafer foundry operators in the semiconductor industry, showed the chipmaker’s ambitions to integrate resources in the upstream and downstream segments of the local semiconductor industry by holding a stake in a backend IC packaging and testing firm like Chipbond.
Unlike Taiwan Semiconductor Manufacturing Co. (TSMC), the world’s largest contract chipmaker, which entered the high-end IC packaging and testing market by setting up its own production lines, UMC tends to form partnerships by investing in other companies.
Before the deal with Chipbond, UMC had invested in King Yuan Electronics Co., another IC packaging and testing services supplier in Taiwan. In addition to the IC packaging and testing business, UMC has also invested in printed circuit board maker Unimicron Technology Corp.
In a news conference, UMC’s Chief Financial Officer Chitung Liu (???) said his company is the first contract chipmaker in Taiwan to supply chips for production of drive ICs inside flat panels, while Chipbond has become a leader in Taiwan’s IC packaging and testing services for flat panel’s drive ICs.
Under the partnership, Liu said, UMC and Chipbond are determined to work more closely in the drive IC arena to roll out chips with higher frequencies and more energy efficiency for flat panel makers.
Chipbond had previously planned to launch a private placement earlier this year but the project was killed by a vote in its annual general meeting.
The silver lining now is that Chipbond’s ties with UMC will help the company cement the power of its management, analysts said.
Chipbond, which posted NT$5.61 in earnings per share last year, issued NT$3.8 in cash dividend per share for the 2020 earnings. The figures translated into a payout ratio of 67.7 percent.
In the first half of this year, Chipbond raked in NT$3.96 in EPS, up 58.4 percent from a year earlier. Analysts said that based on Chipbond’s improving bottom line, UMC could pocket large cash dividends for its investment in the IC packaging and testing firms based on higher earnings in 2021.
Commenting on the market prospects, Wu Fei-jain (???), chairman of Chipbond, said a supply shortage of drive ICs for flat panel use is expected to continue into the end of next year.
Wu said Chipbond raised its product prices in the third quarter of this year, the fourth consecutive quarter that the company has raised prices, but there was no immediate plan for another price hike in the fourth quarter.
Source: Focus Taiwan News Channel