ASE-SPIL Merger Wins Clearance

Advanced Semiconductor Engineering (ASE) and Siliconware Precision Industries (SPIL) have finally received all anti-trust approvals for the proposed and long-awaited merger between the two IC packaging houses.

The anti-trust approvals are a big step that clears the way for the creation of a combined ASE-SPIL entity. The ASE-SPIL entity, in turn, will create a powerhouse in the outsourced semiconductor assembly and test (OSAT) industry.

In 2016, Taiwan’s ASE, the world’s largest OSAT, launched an unsolicited bid to acquire a controlling stake in Taiwan’s SPIL, the world’s third largest OSAT.

The completion of the deal has been delayed due to regulatory issues, especially in China. ASE and SPIL received clearances from the Taiwan Fair Trade Commission and the U.S. Federal Trade Commission on Nov. 16, 2016 and May 15, 2017, respectively. Then, on Nov. 24, 2017, the Anti-Monopoly Bureau under the Ministry of Commerce (MOFCOM) in China announced “that it has conditionally approved the proposed transaction.”

Now, ASE will proceed with the establishment of a holding company. It is expected that a general meeting will be convened in February 2018 and the establishment of the holding company will be completed by the end of May 2018. This timeline, however, is subject to the review progress of authorities.

Then, ASE and SPIL will operate as separate entities. Initially, the two companies will be part of a holding company, dubbed ASE Industrial Holding, at least for the short term.

The combination of ASE and SPIL will also enable the two companies to share R&D and product development. ASE, SPIL and other OSATs have seen an increase in R&D costs, particularly in the development of advanced packaging. Fewer OSATs can afford to make the necessary investments in advanced packaging, a move that is fueling the merger and acquisition activity in the arena.

There are other reasons for the ASE-SPIL merger. In fact, China recently launched an initiative to expand its IC-packaging efforts. Chinese-backed firms already have acquired one OSAT, a move that potentially threatens Taiwan’s position in the OSAT market.

In 2015, Jiangsu Changjiang Electronics Technology (JCET), China’s largest OSAT, acquired Singapore’s STATS ChipPAC, a move that propelled China into the upper ranks of the OSAT business.

Other large OSATs are also acquiring competitors as a means to boost their economies of scale. In 2016, U.S.-based Amkor increased its ownership in J-Devices, Japan’s largest OSAT, from 65.7% to 100%. In February, Amkor acquired Nanium, a move that expands Amkor’s efforts in fan-out wafer-level packaging.