The semiconductor industry, which is accelerating its merger and integration activities, has witnessed another significant deal, this time initiated by the country's third-largest packaging and testing firm. On February 11, leading domestic semiconductor packaging and testing company Tianshui Huatian Technology Co.,Ltd. (002185.SZ) announced its plan to acquire a 100% stake in Huayi Microelectronics Co., Ltd. (Huayi Microelectronics) through a combination of share issuance and cash payment, with a total transaction value of 2.996 billion yuan. Additionally, the company intends to raise up to 400 million yuan in supporting funds through a private placement. The company stated that the acquisition target is a leading high-performance semiconductor power device manufacturer in Shaanxi province, characterizing the deal as a strategic combination of strengths. Upon completion, the acquisition will enable the company to evolve into a comprehensive semiconductor packaging and testing group and establish a second growth trajectory. It has been observed that Huatian Technology, which previously ascended to become one of China's top three packaging and testing players through a series of acquisitions, is now leveraging its experience by acquiring assets from an affiliated party. This move is seen as an effort to capitalize on the AI computing boom for further advancement, but it also carries elements of a high-stakes gamble. The company's operational profitability has been a concern, as it is heavily dependent on market cycles and government policies. Compounded by debt-fueled capacity expansion, it already faces multiple risks including high debt levels and challenges in absorbing new production capacity. The integration of Huayi Microelectronics, which attempted but failed to list on Shanghai's STAR Market in 2023 and has exhibited significant earnings volatility, raises questions about whether the combined entity can achieve synergistic benefits greater than the sum of its parts.
Domestic Third-Placer Targets Shaanxi Leader According to the merger announcement, the transaction involves 27 parties, including Huatian Electronics Group, Xi'an Houyi Investment, and Xintianyu Platinum, with a total consideration of 2.996 billion yuan, representing a premium of 166.17%. Since Huatian Technology's controlling shareholder is Huatian Electronics Group, and its ultimate controllers are 13 natural persons including Xiao Shengli and Xiao Zhicheng, while the executive partner of Xi'an Houyi Investment is Xiao Zhicheng—one of the listed company's actual controllers—this transaction constitutes a connected transaction.
In terms of the payment structure, the cash portion amounts to 359 million yuan, the initial share consideration is 2.117 billion yuan, and a deferred share payment of 520 million yuan is scheduled. The raised supporting funds will be used to cover the cash payment, fees for intermediary institutions, and other merger-related integration expenses.
Huayi Microelectronics is one of the few high-tech enterprises in China that integrates power device R&D and design, packaging and testing, reliability verification, and system solutions. Its main products include both proprietary brand items and packaging and testing services. The proprietary products consist of high-performance power devices independently designed by Huayi Microelectronics, focusing on advanced power components such as SGT MOS and Trench MOS. These products are already used in end-products of well-known domestic and international clients including BYD, GAC, H3C, New Energy, Hangke Technology, Broad Ocean Motor, and DJI, covering high-growth sectors like automotive electronics, servers, and new energy. Its packaging and testing services are recognized for high reliability, consistency, and stability, serving prominent international and domestic semiconductor companies such as Infineon, STMicroelectronics, ON Semiconductor, Dongwei Semiconductor, Huawei Electronics, Silan Microelectronics, and Innoscience, receiving broad customer acceptance. In fact, Huatian Technology is no stranger to external growth through acquisitions; its rapid development post-listing has been largely driven by several key mergers. Established in 2003, Huatian Technology initially engaged in semiconductor integrated circuit packaging and testing, with its packaging capacity increasing from 1 billion units in 2004 to 3 billion units by the end of June 2007. The company successfully listed on the Shenzhen Stock Exchange in November 2007, though its revenue at the time was below 700 million yuan. In 2015, Huatian Technology acquired the U.S.-based FCI, gaining access to advanced technologies such as WLCSP (wafer-level chip scale packaging), FC (flip-chip), and WB (wafer bumping). In 2018, its acquisition of Malaysia's Unisem provided cutting-edge processes including Bumping and SiP (system-in-package). This acquisition also established a solid foothold in Southeast Asia, mitigating certain geopolitical risks and securing international client resources from companies like Broadcom and Qorvo. These strategic moves transformed Huatian Technology from a manufacturer primarily handling traditional DIP/SOP packaging into a competitor capable of rivaling industry leaders such as JCET and Tongfu Microelectronics. By this time, the company's revenue had surpassed the 7 billion yuan mark. Around 2019, Huatian Technology solidified its position as the third-largest packaging and testing provider in China. According to its latest statements, the company focuses on integrated circuit packaging and testing, ranking among the top three in mainland China and sixth globally. Among the world's top ten packaging and testing manufacturers, it recorded the highest revenue growth rate in 2024, having accumulated significant leading advantages in the IC packaging and testing sector. Based on revenue and market share rankings, Huayi Microelectronics held the top position among semiconductor power device enterprises in Shaanxi province in both 2023 and 2024. Huatian Technology stated, "The target company complements and synergizes with the listed company in terms of industrial understanding, business layout, sales, procurement, R&D, and products. After the transaction, the listed company will become a comprehensive semiconductor packaging and testing group, rapidly expanding into power device packaging and testing on top of its existing IC packaging and testing operations, significantly enhancing its competitive edge in the field. Concurrently, it will extend into the R&D, design, and sales of proprietary power device products, creating a second growth curve and generating new revenue streams."
A High-Stakes Bet in the AI Era In recent years, alongside global technological progress, the worldwide semiconductor industry has generally maintained an expanding scale. Driven by demand from smartphones, data centers, automotive electronics, tablets, televisions, and other areas, the industry's sales grew from $353.17 billion in 2015 to $626.87 billion in 2024, achieving a compound annual growth rate of 6.6% with overall fluctuations trending upward. However, due to weak end-market demand, the global semiconductor industry entered a cyclical downturn in the second half of 2022. The industry's market size decreased by 8.2% year-on-year in 2023. In 2024, with the full release of market demand represented by artificial intelligence and computing power, the industry rebounded by 19.1%. The latest forecast from WSTS indicates that the global semiconductor market is expected to reach $772.243 billion in 2025, a year-on-year increase of 22.5%, and is projected to grow a further 26.3% in 2026. Looking ahead, with the continuous advancement of AI large models, autonomous driving, Industry 4.0, and consumer electronics upgrades, the global semiconductor industry is expected to maintain medium-to-high-speed steady growth. Against a backdrop of increasing macroeconomic uncertainties such as trade frictions, accelerating import substitution and achieving semiconductor industry self-sufficiency have risen to the level of national strategy, presenting historic opportunities for China's semiconductor sector. In this context, Huatian Technology's acquisition is strategically positioned to seize opportunities presented by the AI computing boom. Although it ranks third domestically and sixth globally, with revenue showing a growth trend, its operational profitability remains weak. This reliance on industry cycles and government support becomes particularly evident during semiconductor downturns. Acquisitions are seen as a shortcut to rapidly boost performance. Data shows that from 2021 to 2023, Huatian Technology reported revenues of 12.097 billion yuan, 11.906 billion yuan, and 11.298 billion yuan, respectively. After breaking the 100 billion yuan threshold in 2021, revenue, while fluctuating with the cycle, remained above that level. However, net profit attributable to shareholders was highly volatile, at 1.416 billion yuan, 754 million yuan, and 226 million yuan for those years. A significant portion of its profits came from non-recurring gains, such as government subsidies and investment income. After adjusting for these, net profit was only 1.101 billion yuan, 264 million yuan, -308 million yuan, and 33.4194 million yuan, respectively. In 2024 and the first three quarters of 2025, the company's performance rebounded significantly, with revenues of 14.462 billion yuan and 12.380 billion yuan, representing year-on-year growth of 28% and 17.55%, respectively. Net profit attributable to shareholders was 616 million yuan and 543 million yuan, up 172.29% and 51.98% year-on-year. However, this profit growth was again not primarily driven by operational performance. In 2024, 463 million yuan of profit came from government subsidies, and in the first three quarters of 2025, government subsidies contributed 403 million yuan.
It is important to note that although Huayi Microelectronics is the leading power device company in Shaanxi, its financial performance has also been highly volatile. The company sought an IPO on the STAR Market in June 2023 but withdrew its application in June 2024 due to sharp declines in performance caused by changes in downstream demand and the competitive landscape. From 2020 to 2024, and for the first nine months of 2025, Huayi Microelectronics reported revenues of 847 million yuan, 1.160 billion yuan, 1.157 billion yuan, 1.143 billion yuan, 1.383 billion yuan, and 1.235 billion yuan, respectively. Net profit attributable to shareholders was 41.6332 million yuan, 88.1340 million yuan, -43.2093 million yuan, -148.6333 million yuan, 14.5324 million yuan, and 50.1309 million yuan for the corresponding periods. Regarding performance commitments, the transaction counterparts are relatively optimistic about Huayi Microelectronics' prospects over the next three years, committing that its Design Business Group must achieve annual net profits of no less than 139 million yuan, 166 million yuan, and 189 million yuan for 2026-2028, respectively, while the cumulative net profit of its Packaging and Testing Business Group must be positive. It is worth noting that although Huayi Microelectronics' performance has recovered and the acquisition is at a premium, its current valuation of 2.996 billion yuan is significantly lower than its valuation during the IPO application process, and even lower than its pre-IPO financing valuation. Rough estimates indicate that Huayi Microelectronics was valued at over 6.8 billion yuan during its IPO application, and its valuation was around 4.8 billion yuan during a fifth round of capital increase in December 2022, both far exceeding the current acquisition valuation. Furthermore, besides acquiring Huayi Microelectronics, Huatian Technology has been continuously bolstering its production capacity through secondary market refinancing and long-term and short-term borrowing, making a significant bet on the红利 (dividends) of the AI era. A review shows that since its listing in 2007, Huatian Technology has utilized capital markets extensively. Beyond its initial public offering, it has conducted three private placements (the current fundraising for the merger would be the fourth), one bond issuance, and one rights issue, accumulating total direct financing of 10.047 billion yuan.
Simultaneously, beginning in 2017, the company's short-term borrowings increased substantially year by year, rising from 15 million yuan at the end of 2016 to 4.996 billion yuan as of September 30, 2025. Long-term borrowings also piled up, increasing from 76.2547 million yuan to 6.934 billion yuan.
Analysis suggests that in the short term, the recovery in the semiconductor industry, coupled with volume growth in automotive electronics and storage demand, the ramp-up of advanced packaging capacity, and the release of synergies from the acquisition, are likely to drive continued performance delivery. However, in the long run, risks such as technological iteration, debt-fueled capacity expansion, capacity absorption, and merger integration remain persistent challenges. Amid the wave of "import substitution," the company faces competition not only from domestic rivals like JCET and Tongfu Microelectronics but also from numerous international giants. Whether Huatian Technology's series of high-stakes bets will pay off remains to be seen over time.
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