Japanese Government-backed Fund to Acquire Chip Material Maker JSR for $6.4 Billion

By IndraStra Global News Team

Cover Image Attribute: Akio Kon, Bloomberg / Getty Images

On June 26, 2023,  Japan intensified its initiatives to strengthen its chip sector by announcing that a government-supported fund, Japan Investment Corporation (JIC), has agreed to acquire JSR Corporation, a manufacturer of semiconductor materials, for approximately 909.3 billion yen ($6.4 billion). This action, overseen by the influential trade ministry, is part of a series of proactive measures taken by the government to regain Japan's dominance in advanced chip manufacturing. Additionally, Japan aims to maintain its competitive advantage as a provider of materials and tools utilized in chip production.
In late December, JIC intends to initiate a tender offer to acquire and privatize JSR Corporation. The offer will be set at 4,350 yen per share, representing a significant 35% premium over the closing price on Friday. Mizuho Bank and the government-backed Development Bank of Japan (DBJ) will provide the necessary financing for this transaction. Following the official announcement, JSR shares experienced a notable surge, reaching their daily limit of a 22% increase. This news sparked anticipation of industry consolidation, leading to a 10% rise in the shares of Tokyo Ohka Kogyo, a peer company. Similarly, Sumitomo Chemical and Shin-Etsu Chemical saw a modest increase of 2% each.
JSR, initially established in 1957 as a government-supported manufacturer of synthetic rubber, announced a notable 20% increase in sales, reaching 408.9 billion yen, for the fiscal year ending in March. However, their operating profit experienced a decline of 33% to 29.4 billion yen during the same period. It possesses a significant 30% share of the global photoresist market, which undoubtedly qualifies it as a company of strategic national significance. Photoresists play a vital role in semiconductor manufacturing and are an area where Japan is a prominent global leader. These chemical agents are applied to silicon wafers, which are integral components of integrated circuits, contributing to the overall performance enhancement of semiconductors.
From the standpoint of the Japanese government, acquiring JSR Corporation aligns perfectly with its proactive strategy of safeguarding the nation's current advanced technologies while simultaneously fostering the development of future capabilities. The necessity for government intervention has intensified due to the escalating competition between the United States and China in the semiconductor industry, where chips have progressively evolved into a strategic commodity that holds significant importance for Japan's economic security.

Parallel Development

The Japanese government revised its semiconductor and electronics industry strategy in early June. As part of this update, they set an ambitious goal of tripling the annual domestic sales of semiconductor products, aiming for a value exceeding 15 trillion yen (US$104.4 billion).
Furthermore, Tokyo is providing substantial financial assistance to foreign and domestic companies to establish fabrication plants. As a notable example, Taiwan Semiconductor Manufacturing Company (TSMC) recently announced its plans to construct a second facility in Japan, specifically in Kumamoto, in the country's southern region. The government is providing significant financial support, amounting to 476 billion yen (US$3.3 billion), for establishing the company's inaugural plant in the prefecture.

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