Chip testers unite: mergers beget mergers
The esoteric but critical world of semiconductor testing does not get a lot of attention, and that's especially the case in the last few years when the whole semiconductor industry has been suffering. But, like so many industries, it is concentrating into an ever tighter oligopoly.
Recently, Singapore-based ST Assembly Test Services (STATS) acquired the US's ChipPAC in a $1.6 billion stock deal.
STATS is the #4 chip testing company in the world, ChipPAC ranked #6. Both companies had recently expanded internationally. STATS had just completed a deal to acquire Taiwan's Wintek Semiconductor. ChipPAC had acquired Intersil's Malaysian testing facilities. The STATS ChipPAC deal will make the company #2 in the chip testing industry. US-based Amkor is #1, while two Taiwanese firms, ASE and SPIL are now #3 and #4 in the industry.
Financial analysts were of the opinion that STATS, which is 70% owned by the Singapore government, paid too much. But we'd argue that the prospect of moving from #4 to #2 is worth a major premium. As we've noted before, being #4 is a position of great disadvantage, while being number #2 is a power spot.
The merger is already shaking up the industry, according to an editorial in the March, 2004 edition of Chip Scale Magazine ("Amkor is a moving target").
If nothing else, [industry expert] Dr. [Subash] Khadpe points out, this merger radically alters the IC packaging foundry landscape. "I think it emphasizes the fact that you need to be bigger to succeed today. It also puts a lot of pressure on the not-so-big companies that will be hard-put to get the new business that's coming down the pike.
The ChipPAC-STATS merger, Dr. Khadpe asserts, "will put a lot of pressure on Amkor to expand and acquire."
Mergers instill fear and uncertainty in rivals. Mergers beget mergers.
