China's Sino IC to buy $580m US chip testing company

Capital for the investment comes from China’s $20bn national integrated circuit fund, which was established in 2014 to develop the country’s semiconductor industry.

Chinese government-backed private equity firm Sino IC Capital will acquire Massachusetts-based semiconductor testing company Xcerra in a deal valuing the company at $580 million, as China moves to become the world’s largest chip maker.

Under the terms of the deal, Sino IC Capital will acquire Xcerra through its subsidiary Unic Capital Management. Unic will pay $10.25 per share in cash for all outstanding shares of the company, about 16 percent above the stock's average trading price over the past 30 days, according to a statement from the firms.

The deal is subject to approval by the Committee on Foreign Investment in the US and is expected to close by year-end. It is reportedly the first significant attempt by a Chinese investment firm to acquire a US-based semiconductor company since US president Donald Trump took office.

The firm’s investment comes from its $20 billion China Integrated Circuit Industry Investment Fund, the national fund set up in August 2014 to support China’s integrated circuit industry.

The capital will be used to develop new product lines and expand into new markets, Sino IC’s president Jun Lu said in a statement. Xcerra’s leadership team will remain in place and will continue to manage the company’s daily operations following the acquisition. Lu also said Xcerra will keep its headquarters in Norwood, Massachusetts.

Xcerra designs and manufactures equipment and other related products to test semiconductors and printed circuit boards.

China has identified integrated circuits as a key strategic industry an announced its ambition to become the world's leading chip maker by 2030.

To drive the development of its semiconductor industry, the Chinese government – the Ministry of Industry and Information Technology and the Ministry of Finance – established the China IC Fund two years ago and has pumped more than 50 billion yuan ($7.2 billion; €6.8 billion) in domestic companies dealing in integrated circuit material and equipment (AMEC and SH Silicon), design (Tsinghua Unigroup), manufacturing (SMIC and Silan) and assembly testing (Huatian).

Limited partners in the fund include China Development Bank Capital, China Tobacco, E-Town Capital, China Mobile, Shanghai Guosheng Group, China Electronics Technology Group Corp, Tsinghua Unigroup Communications and Sino IC Capital.