New Offer Challenges ON’s Acquisition of Fairchild

Don’t count on ON Semiconductor Corp. acquiring Fairchild Semiconductor International Inc. as a done deal just yet.

A Chinese venture capital group led by China Resources Holdings Co.’s semiconductor business and Hua Capital Management Ltd. has made an offer for the chipmaker that bests the bid made by ON. The Chinese group’s offer—for about $2.46 billion—is just a bit above what ON was offering for the assets to Fairchild, but in a statement Fairchild says it will examine the offer and make the best choice based on what is best for its shareholders. Of course, with the bid coming from China, this opens up a host of other regulatory issues that would need to be worked out in order for the deal to go through.

ON Semiconductor put a bid in for Fairchild in November just a month after Fairchild said it was seeking a buyer and was in discussions with a number of companies including ON and Infineon Technologies. Over the course of the past year, Chinese venture capitalists have made a splash in the semiconductor market with investments and acquisitions in order to grow China’s domestic semiconductor industry. Royal Philips agreed to sell 80.1% of its Philips Lumileds, which makes LED components and automotive lighting, to GO Scale Capital. Go Scale also launched a $5 billion mergers and acquisition fund to target cross-border buyouts of emerging technology companies in order to scale opportunities in China.

In July, another Chinese venture capital firm known as Uphill Investment Co. fought off Cypress Semiconductor in order to acquire chipmaker Integrated Silicon Solution Inc. (ISSI). Yet another firm, Hua Capital Management Co. Ltd grabbed up OmniVision Technologies Inc. in order to gain image sensor ICs.

This also continues what has become a trend in the semiconductor industry of escalating bids in an environment that has become saturated with mergers and acquisitions: the Cypress/Uphill battle for ISSI, the back and forth battle between Microsemi and Skyworks Solutions over buying PMC-Sierra and the Dialog Semiconductor/Cypress bidding war for Atmel Corp.