In the first three quarters of 2024, the global semiconductor market has shown promising signs of recovery, with listed companies within the sector witnessing a substantial increase in overall performanceThis rebound is accompanied by a notable relaxation in the policies governing mergers and acquisitions (M&A), as evidenced by initiatives such as the "Sixteen Policies for Technology," "Eight Guidelines for the Sci-Tech Innovation Board," and "Six M&A Guidelines" rolled out by the China Securities Regulatory Commission (CSRC).

The revival of the semiconductor industry has sparked a significant increase in M&A activityAs reported, since June 2024, more than 45 new M&A transactions have been recorded in the Sci-Tech Innovation Board, with 13 of these transactions specifically in the semiconductor sector, making it the most active industry in this regard

Analysts from Haitong Securities predict that the upcoming period will see a surge in M&A cases within the semiconductor sector as leading domestic firms continue to iterate technologically while seeking acquisitions of competitors or upstream and downstream partners to enhance competitiveness and product synergy.

The semiconductor industry faced challenges in 2023, influenced by various factors, including capacity expansion cycles, innovation cycles, and declining demand, leading to a cyclical downturnAccording to the Semiconductor Industry Association, global sales in the semiconductor sector totaled $526.8 billion in 2023, an 8.20% decrease from $574.1 billion in 2022. However, a turning point arrived towards the end of 2023, driven by Nvidia's remarkable performance in the artificial intelligence chip arena and a resurgence in demand within the consumer electronics market.

By the third quarter of 2024, the global semiconductor sales surged to $166 billion, marking a remarkable year-on-year increase of 23.20% and a quarter-on-quarter rise of 10.70%. This increase represents the largest growth rate observed since 2016, with an overall projection estimating the 2024 global semiconductor market size to reach approximately $620.2 billion, reflecting a 17% increase over the previous year.

In a related note, data from the General Administration of Customs of China indicates a robust growth in integrated circuit exports, amounting to 931.17 billion yuan in the first ten months of 2024, a 21.40% increase year-on-year, with a total export volume of 245.99 billion pieces, representing an 11.30% year-on-year growth.

Furthermore, companies listed in the A-share semiconductor industry have reportedly experienced significant growth, with aggregate revenue reaching approximately 299.35 billion yuan in the first three quarters of 2024, reflecting an 18.35% year-on-year increase

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Moreover, the net profit attributable to shareholders, after excluding non-recurring gains and losses, reached 20.10 billion yuan, indicating a striking 52.46% increase compared to the previous yearOut of 78 semiconductor companies on the A-share market, 58 reported positive revenue growth during this timeframe.

In light of the sector's recovery, a variety of supportive policies have emergedNotably, on April 19, 2024, the CSRC introduced comprehensive measures aimed at fostering high-quality development among technology companies across multiple dimensions, including public financing, mergers, bond issuances, and private equity investmentsIn June, the "Eight Guidelines for the Sci-Tech Innovation Board" were launched to strengthen support for M&A activities, particularly focusing on enhancing industry synergy through vertical and horizontal integration and promoting competitive financing methods.

Further expanding upon these developments, on September 16, 2024, the CSRC announced "Six M&A Guidelines," reinforcing the essential functions of resource allocation during M&A transactions and underscoring the capital market's role as a principal channel for corporate mergers and restructuring

These guidelines encourage cross-industry mergers and acquisitions, including the acquisition of unprofitable assets while increasing tolerance towards issues such as valuation, performance commitments, industry competition, and related transactions.

The resulting surge in M&A activity has stimulated market vitality, facilitating rapid listings for high-quality companies in fields like semiconductors, artificial intelligence, and new energy through mergers and acquisitionsThis consolidation not only optimizes industry chain resources but also enhances market competitiveness and operational synergy.

As of now, numerous semiconductor companies have disclosed M&A announcementsNotably, in September 2024, Shuangcheng Pharmaceutical announced a restructuring plan intending to purchase all shares of Aola through a combination of shares and cash payments, associated with a company focused on the research, production, and sales of analog and mixed-signal chips.

Subsequent announcements in October revealed that Guangzhi Technology plans to acquire a 100% stake in Xiandian Technology through share issuance and cash payments while Fulede has also declared its intent to purchase the entire stake of Fulahua through a blend of shares and convertible bonds.

In November, Jingfeng Mingyuan revealed intentions to acquire all shares of Yichong Technology through various payment methods, including share issuance and cash payments, while Zhaoyi Innovation announced plans to co-purchase 70% of Suzhou Saixin's shares with affiliates through cash payments.

Many other semiconductor firms have also reported active M&A movements, including Zhongju Semiconductor's acquisition of Heraeus Conamic UK Limited, NaXingwei's acquisition of Maigen Electronics, and others

This widespread trend suggests a robust appetite for consolidation and resource optimization within the semiconductor sector.

Moreover, two noteworthy strategies have emerged from these M&A transactions that others can learn from: the application of differentiated pricing models and an emphasis on industrial synergyDifferentiated pricing effectively meets the interests of various parties, while industrial synergy enables companies to create mutually complementary relationships through horizontal and vertical integration.

For instance, on November 6, 2024, Silaipu disclosed a new trading proposal wishing to acquire all shares of Chuangxin Micro through convertible bonds and cash paymentsThis transaction employed a differentiated pricing strategy in which different stakeholders received varied valuations for their shares

Similar transactional structures were seen in Zhaoyi Innovation's acquisition of Suzhou Saixin, wherein different prices were assigned based on the extent of shareholding.

These cases illustrate how establishing a differentiated pricing model can assist in balancing the complex stakeholder interests, providing a template that may benefit other firms in future transactionsFurthermore, contemplating industrial synergy, the acquisition of Chuangxin Micro by Silaipu fills a significant void in their portfolio concerning battery management chips, paving the way for the company to evolve into an all-encompassing analog chip manufacturer.

However, it is crucial to recognize that while M&A activities within the semiconductor industry can expedite product line expansion and enhance competitiveness, the high premiums associated with acquisitions and potential risks from goodwill cannot be overlooked