Chip assembly industry is still ripe for buyout deals

The chip assembly sector is still ripe for buyouts, despite a decision by The Carlye Group not to acquire chip maker Advanced Semiconductor Engineering (ASE), an ASE executive said Wednesday.

The Carlyle Group scrapped a proposal to buy ASE for $5.5 billion last week because the companies couldn’t agree on a fair price.

Some analysts worried the end of the deal could impact ASE or the overall chip assembly industry.

“There will still be consolidation in the sector,” said Joseph Tung, chief financial officer of ASE, the world’s largest chip packaging and testing company. There are a lot of small players in the industry, making it ripe for consolidation, he said on the sidelines of the company’s first quarter investors’ conference.

ASE will continue to look for acquisitions, but is more interested in taking over chip assembly operations from large chip makers, which then become its customers, Tung said.

ASE has purchased chip assembly factories from a number of companies in the past, including NEC Electronics and Motorola, and is currently in talks with NXP Semiconductors for a stake in some factories in China. Such deals normally include contracts for ASE to provide contract chip assembly services for these companies.

One potential synergy from the Carlyle deal had been the prospect of ASE taking over chip assembly factories currently owned by Freescale Semiconductor, which was purchased in a $17.6 billion deal last year by a group including Carlyle. ASE would still be interested in potentially taking over some Freescale factories if an offer were made and the deal made sense, Tung said.

The companies are currently not in talks over any deal, he said.

The scrapping of the Carlyle deal had no impact on ASE’s operations, Tung said. The Taiwanese chip maker continues to invest in DRAM (dynamic RAM)-related chip assembly production lines and has seen smooth sailing in applications to the Taiwan government for permission to invest in China’s chip sector.