Chinese storage specialist Longsys, a major client of US chip maker Micron, completes US$132 million takeover of Suzhou plant from Taiwan’s Powertech

Storage systems specialist Shenzhen Longsys Electronics, one of US memory chip maker Micron Technology’s largest clients in China, has completed its US$132 million takeover of a mainland plant from Taiwan’s Powertech Technology, one of the world’s largest semiconductor assembly, packaging and testing companies.

Longsys, which makes digital storage products that include memory modules and solid-state drives, said in a filing to the Shenzhen Stock Exchange on Wednesday that it has finalised the acquisition of a 70 per cent equity stake in Powertech Technology (Suzhou), which provides chip packaging, testing and surface-mount technology services in the most populous city of eastern Jiangsu province.

That acquisition, which Longsys announced in June, involved an initial payment of US$65.8 million, with the balance to be paid on a later date, according to the company.

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Longsys’ shares in Shenzhen closed up 1.07 per cent to 96.70 yuan (US$13.25) on Thursday.

Shenzhen Longsys Electronics operates an efficient and low-cost automated testing system for industrial hardware and storage products. Photo: Handout alt=Shenzhen Longsys Electronics operates an efficient and low-cost automated testing system for industrial hardware and storage products. Photo: Handout>

The latest corporate acquisition by Longsys reflects the continued initiatives by mainland Chinese tech firms to further develop the country’s position in the global semiconductor manufacturing supply chain.

The mainland’s share of that supply chain – covering foundry work and outsourced assembly and test (OSAT) services – is expected to increase over the next few years, while Taiwan’s portion will decline amid changes brought by various governments’ semiconductor policies and geopolitical tensions, according to a report last week by market research firm IDC.

China’s share in OSAT work globally is projected to grow to 22.4 per cent by 2027, up from 22.1 per cent last year.

Micron had been the top supplier for Longsys between 2018 and mid-2021, with purchases exceeding 33 per cent of total procurement contracts of the Boise, Idaho-based company during that period.

In 2017, Longsys acquired the “Lexar” brand name from Micron to help expand its removable storage business, including memory cards and USB flash drives.

For Micron, its fortunes in mainland China have changed since the country’s internet watchdog initiated a cybersecurity investigation into the company in March. The Cyberspace Administration of China in May said Micron’s products had failed its network security review and imposed a partial ban on the sale of its products in the country.

But about four weeks after that ban was announced, Micron revealed plans to invest 4.3 billion yuan to upgrade its chip packaging plant in Xian, capital of northwest Shaanxi province. That would include buying the operations of its outsourcing partner Powertech and adding new buildings to the site, representing the US firm’s bid to reduce the fallout from China’s sanctions.

In August, Micron named Jeff Li Xinming as head of its China government affairs team in a fresh effort by the company to try and mend ties with Beijing. Micron is also expected to take part for the first time in China’s International Expo scheduled for early November in Shanghai, according to a report by China Business News.

China remains hemmed in on all sides of the semiconductor market by the US and its allies, even as Beijing pushes its self-sufficiency drive to cut the country’s reliance on American-made technologies. Japan, South Korea and Taiwan have joined the US-led Chip 4 Alliance, which is seen by Beijing as a plot by Washington to exclude China from semiconductor supply chains.

This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP’s Facebook and Twitter pages. Copyright © 2023 South China Morning Post Publishers. All rights reserved.