Multiple Semiconductor M&A Deals Terminated, But Long-Term Industry Consolidation Trend Remains Unchanged

In recent weeks, several listed semiconductor companies—including Verisilicon Microelectronics(Shanghai)Co.,Ltd. (芯原股份), Hygon Information Technology Co.,Ltd. (海光信息), 3peak Incorporated (思瑞浦), and Dioo Microcircuits Co.,Ltd. Jiangsu (帝奥微)—have halted restructuring plans, drawing market attention. Industry experts attribute these terminations to overlapping factors such as cyclical downturns, valuation gaps, and regulatory scrutiny rather than isolated causes, while maintaining that long-term consolidation remains inevitable.

**Multiple Semiconductor Firms Abandon Restructuring Plans** Within just half a month, multiple semiconductor companies scrapped M&A deals. On December 18, Verisilicon Microelectronics(Shanghai)Co.,Ltd. held an investor briefing to explain its termination of a 97.007% stake acquisition in Xinlai Zhirong Semiconductor Technology (Shanghai). The company cited misalignment between the target’s management demands and market conditions, policy requirements, and shareholder interests.

Similarly, Hygon Information Technology Co.,Ltd.’s high-profile stock-swap merger with Dawning Information Industry collapsed on December 9 due to "significant market shifts" and complexities involving multiple parties. That same day, 3peak Incorporated abruptly terminated its acquisition of Ningbo Aura Semiconductor merely two weeks after initial disclosure. Earlier, on December 5, Dioo Microcircuits Co.,Ltd. Jiangsu abandoned its bid for a 100% stake in Rongpai Semiconductor (Shanghai) after failing to agree on core terms like pricing and performance guarantees.

**Multifaceted Factors Behind Deal Failures** While termination notices cited varied reasons—from "market volatility" to "irreconcilable terms"—industry insiders pinpoint valuation mismatches as a key culprit.

Hygon Information Technology Co.,Ltd.’s terminated merger exemplifies this. CEO Sha Chaoqun noted during the briefing that post-announcement stock price fluctuations and divergent stakeholder perspectives derailed the deal. Both firms will maintain independence while continuing existing collaborations to strengthen supply chains.

Zhu Keli, founding dean of the Guoyan New Economy Research Institute, emphasized that recent failures stem from compound challenges: valuation disputes (with sellers clinging to peak-cycle pricing while buyers prioritize downturn resilience), stringent regulatory reviews (given semiconductors’ strategic importance), and financing hurdles.

Regulatory tightening has further filtered out speculative deals. On December 5, China’s securities regulator proposed stricter M&A rules under the *Listed Company Supervision and Management Regulations (Draft)*, emphasizing due diligence and industrial synergy. The Shanghai Stock Exchange’s November 2024 case studies also highlighted red flags like insider trading and fraudulent accounting in M&A deals.

**Long-Term Consolidation Momentum Intact** Despite short-term setbacks, analysts remain bullish on semiconductor consolidation. Zhu projected future deals will prioritize "scale diversification, sector focus, and model flexibility," with recovery tied to cyclical rebounds.

Key trends include: - **Scale**: Mega-deals for core resources by giants alongside niche acquisitions by smaller firms. - **Sectors**: Hotspots in semiconductor equipment, third-gen semiconductors, automotive chips, and AI processors. - **Models**: Vertical integration (for supply-chain efficiency) may dominate over horizontal or cross-sector mergers.

Zhu identified three viable deal types: industrial synergy-driven, technology-complementary, and resource-optimizing M&A.

Globally, consolidation is a maturation hallmark. China’s semiconductor sector is transitioning from expansion to quality-focused integration, weeding out suboptimal deals. Truly synergistic transactions—enhancing core competitiveness—will still gain traction, with M&A activity expected to rebound significantly by 2026.