The semiconductor industry is experiencing a significant surge in mergers and acquisitions (M&A), fueled by the recovery of the sector and a series of favorable policiesRecent data reported by Tonghuashun indicates that as of now, a total of 58 semiconductor companies listed on the A-shares have disclosed M&A activities this year, showcasing a remarkable increase of 41.46% compared to the 41 companies that reported similar activities in the same period last yearIndustry experts speculate that sectors focused on new productive forces are poised to become focal points of this invigorated M&A wave, with the semiconductor domain being a notable example.

The recent activity within the semiconductor sector has been buzzing with various public companies announcing their M&A plansFor instance, on November 18, Huahai Changkai released an announcement regarding its plans to purchase 100% equity of Hengso Huawai Electronics Co., Ltd

through a combination of issuing shares and cash payments, leading to its stock being suspended from trading starting November 19. Similarly, on November 17, Xidi Micro revealed its intentions to acquire 100% shares of Chengxin Micro through a mix of cash and share issuance to four transaction parties, which included notable investorsThese developments exemplify the industry's aggressive approach toward growth through M&A.

The trend has been apparent over the last few months, with multiple companies in the semiconductor sector revealing their M&A strategiesFor instance, on November 5, Zhaoyi Innovation disclosed plans to cash-purchase 70% of Suzhou Saichip’s sharesOn November 4, Jingfeng Mingyuan announced its intent to issue shares and convertible bonds along with cash to acquire 100% of Yichong Technology from 50 different partiesEarlier in mid-October, Fulade also indicated plans to issue shares and bonds for acquiring 100% of Fulaihua from a diverse group of stakeholders

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These M&A moves not only accelerate expansion for these companies but also facilitate greater strategic synergies across the sector.

The Tonghuashun statistical data further illustrates the M&A dynamics in the A-share market, revealing a total of 58 semiconductor companies disclosing such activities this year—a stark increase of over 41% from the previous yearSeptember alone saw a whopping 24 companies disclose M&A-related developments, indicating a robust excitement within the sector.

As the semiconductor industry emerges from a cyclical downturn experienced in 2022 and 2023, it is now witnessing a gradual recovery spurred by the rise of AI, increased market demand, and the continual drive toward terminal innovationWith profitability on the rise, many companies are embracing M&A as a strategy to both grow and consolidate their resources effectivelyThe recent performance reports validate this trend, showing promising revenue generation within the sector

Research from Huafu Securities highlights that semiconductor firms saw a total revenue of 377.69 billion yuan in the first three quarters of 2024, reflecting a 22.84% year-on-year increase, alongside a remarkable 42.58% jump in net profit.

Globally, semiconductor sales are witnessing a robust reboundAccording to the Semiconductor Industry Association (SIA), global semiconductor sales reached $166 billion in the third quarter of 2024, up 23.2% from the previous yearIn the first ten months of 2024, China's integrated circuit exports also rose significantly, totaling 931.17 billion yuan, marking a 21.4% increaseAs Dongguan Securities analyst Liu Menglin pointed out, the January-to-October period shows that improving penetration rates of AI and vehicle intelligentization are set to further bolster semiconductor demand.

Moreover, the supportive policies introduced this year have provided a significant boost to the M&A scene within the sector

The China Securities Regulatory Commission (CSRC) rolled out several initiatives such as the “Support for Science and Technology” rules, aiming to attract more resources towards new productive forcesThis favorable regulatory environment is expected to further catalyze growth in the M&A landscape.

The characteristics of the recent wave of policies highlight a few key themes: Firstly, there’s an intensifying support for M&A activities among technology-driven enterprises; secondly, M&A strategies are shifting from speculative approaches towards more industrially focused integrations; and lastly, these changes are also seen as critical for enhancing the exit framework within the A-share market and improving the overall market ecologyAnalysts from CICC emphasize that M&A activities are geared towards activating the vitality of the capital market, especially as companies seek to foster the emergence of new productive forces.

Looking ahead, insiders opine that this M&A trend, particularly in the semiconductor sector, may continue to evolve

The discussions around mergers and acquisitions reveal a rich tapestry of opportunities driven by macroeconomic conditions, industry value propositions, and supportive policy frameworksZhongyin Securities analyst Wang Jun highlighted that the existing market backdrop mirrors characteristics of the M&A boom witnessed from 2013 to 2016, indicating a potentially fruitful future.

Over the next couple of years, we may witness a variety of M&A situations in the semiconductor field, which could include asset acquisitions from companies under the same ultimate controller or deals that involve cash payments coupled with share issuanceAs domestic semiconductor device companies continue to advance their technological capacities, the path of acquiring firms known for their innovative technologies and synergetic products could lead to a robust competitive edge in the market.

Nonetheless, experts such as Xun Yugen indicate that the M&A activities involving hard-tech firms, including semiconductors, are still in their nascent stages