Editor’s Note
This article examines the complex motivations behind the 2023 acquisition of semiconductor giant JSR by a state-backed fund, a move that has sparked both domestic support for industry consolidation and international debate over government intervention.
In 2023, the news that major semiconductor company JSR agreed to be acquired by the government-backed fund, the Japan Investment Corporation (JIC), made headlines as a major step towards industry restructuring. However, among overseas investors, there were also voices of concern that “the Japanese government is strengthening its interventionist policies.”
What calculations are hidden behind this acquisition worth approximately ¥900 billion? The British newspaper “Financial Times” reveals the inside story through interviews with those involved.
In June 2023, Japan’s major semiconductor materials company JSR announced it would accept a takeover by an investment fund. The total acquisition cost is estimated to reach ¥900 billion.
Not many Japanese people know the name JSR. However, the company is a top manufacturer of photoresists (photosensitive materials) used to transfer integrated circuit patterns onto semiconductor substrates, and counts Samsung Electronics, Taiwan Semiconductor Manufacturing Company (TSMC), and Intel among its customers.
Photoresists are one of the few areas within the semiconductor industry where Japanese companies boast a high market share.
But when it became clear that the buyer was the Japan Investment Corporation (JIC), those involved uniformly frowned. JIC is a public-private fund receiving funding from the Japanese government, and its investments are under the supervision of the Ministry of Economy, Trade and Industry (METI). This ministry, in its former incarnation as the Ministry of International Trade and Industry (MITI), pursued interventionist policies towards companies, supporting Japan’s miraculous post-war economic recovery.
After JIC launches a tender offer (TOB) for JSR’s shares listed on the Tokyo Stock Exchange Prime Market, JSR will go private. At the time, then-Minister of Economy, Trade and Industry Yasutoshi Nishimura explained this acquisition as “an extremely important initiative to enhance the international competitiveness of semiconductor materials, which are key to the development and production of advanced semiconductors, and to strengthen Japan’s industrial competitiveness.”
Furthermore, six months after the acquisition announcement in December, JIC indicated its intention to acquire Shinko Electric Industries, which manufactures semiconductor package substrates, for approximately ¥685 billion in collaboration with multiple companies. This company is a subsidiary of Fujitsu.
At a press conference at the end of 2023, JIC CEO Keisuke Yokoo explained that all domestic semiconductor companies are medium-sized and cannot compete globally on technological prowess alone.
However, many people are not convinced by JIC’s approach.
In 2023, the Nikkei Stock Average showed some of the world’s highest performance, leading to an increase in “activist shareholders” interested in Japanese companies. For example, Robert Hale, co-CEO of the major US investment fund ValueAct, is a JSR shareholder and also an outside director. ValueAct is known as an activist shareholder and has invested in Seven & i Holdings and Nintendo.
This movement occurred because expectations rose that “Japanese companies are trying to improve governance and transparency.” But now, there are voices questioning this. Some view “JIC’s acquisition of JSR as the nationalization of a private company.”
Both companies expressed displeasure at such criticism. A senior METI official said, “How to evaluate the acquisition proposal is a matter for JSR, and the state does not interfere in the management of private companies,” and “If we are to protect national economic interests, we would choose export controls rather than owning specific companies.”
However, a US fund manager who is also a JSR shareholder, considering the direction the Japanese market should take from now on, finds it puzzling that this acquisition was finalized and says the following:
This newspaper interviewed current and former JSR executives, government officials, investors, investment banks, private equity funds (PE), and competitors familiar with this acquisition. As a result, we were able to get closer to the truth behind this acquisition drama.
(To be continued)
JSR explains that they initiated this acquisition with JIC, but is that really the truth?
