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Taiwan wafer company takeover collapses after Germany withholds approval

The planned acquisition of German chip supplier Siltronic by its bigger Taiwan rival GlobalWafers has collapsed after Berlin did not approve the deal, highlighting how national security concerns over supply chains are shaping deals in the industry.

“The takeover offer by GlobalWafers and the agreements which came into existence as a result of the offer will not be completed and will lapse,” the Taiwanese company said on Tuesday after Germany did not make a decision on the deal by the January 31 deadline.

Berlin’s failure to clear the proposed € 4.35bn transaction prevented consolidation in a critical part of the long and complex supply chain for semiconductors. The chips are crucial components to a range of products including cars and smartphones and have been in severe shortage for more than a year.

Together GlobalWafers, the world’s third-largest manufacturer of silicon wafers, and Siltronic, which ranks fourth, would have become the sector’s second-largest player and a serious rival for Japan’s Shin-Etsu, the top manufacturer. In particular, GlobalWafers had aimed at strengthening its presence in Europe, where Siltronic is the leading supplier.

Germany’s economics ministry said it could not complete all necessary steps in its review by January 31. German media quoted a ministry spokesperson saying that the conditional approval from Chinese antitrust regulators, granted on January 21, had come too late for Berlin to review.

Chinese regulators had given a green light for the acquisition on the condition that GlobalWafers spun off Topsil, a Denmark-based unit, and continued to sell wafers to Chinese clients without discrimination. The demands could have complicated operations for the combined company if a third country, such as the US, imposed sanctions requiring companies to cut supplies to China in the future.

But government officials and industry observers also noted broader factors behind Berlin’s failure to clear the deal. In recent years, the German government has toughened rules for foreign takeovers of domestic companies, introducing security reviews for deals in a range of industries including semiconductors, and allowing the state to take a stake in companies if necessary to protect them.

“The most likely real reason this fell through is that Germany is concerned about their technology sovereignty,” said a senior Taiwanese government official. “We understand such considerations, they are not the only ones who are increasingly looking at such factors now. But it makes the global environment for our companies more complex, just as they look to diversify their footprint. ”

Taiwan dominates semiconductor manufacturing, mainly through TSMC, the world’s largest contract chipmaker, which accounts for more than half of the global market for made-to-order chips. But the country is eager to enhance its position in other segments of the industry.

GlobalWafers said it was “very disappointed about this outcome”. The company added that it would analyze the German government’s decision and consider its impact on its future investment strategy.

Doris Hsu, chief executive, has said in the past that GlobalWafers would pursue investments outside Europe if the Siltronic deal could not be completed.

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