New Straits Times

‘LET SILTERRA STAY IN LOCAL HANDS’

Green Packet and DNeX consortium­s have put in solid bids, say observers

- ZURAIMI ABDULLAH AND AYISY YUSOF KUALA LUMPUR bt@nst.com.my

SILTERRA Malaysia Sdn Bhd should remain in local hands to make Malaysia relevant in the intricate and lucrative wafer fabricatio­n business, said industry observers.

They said listed firms Dagang NeXchange Bhd (DNeX) and Green Packet Bhd have put in solid bids to buy SilTerra from parent Khazanah Nasional Bhd.

At least US$1 billion is needed to set up a wafer foundry and Malaysia may not get another opportunit­y like this, they said.

It was reported that Khazanah had allowed two global players, Taiwan’s Foxconn and Germanybas­ed X-FAB, to participat­e in the bid to get a better value for SilTerra.

Green Packet, in a 55:45 partnershi­p with Dongfang Huijia Zhuhai Asset Management Co Ltd, has put in a bid comprising RM235 million cash payment and RM210 million debt absorption.

The proposal from DNeX and its strategic partner, Beijing CGP Investment Co Ltd, is also “very comprehens­ive”, according to people familiar with the matter. The plan focuses on SilTerra’s turnaround with a total investment of RM846 million, they said.

On top of a RM136 million cash payment for Khazanah, DNex and its partner will absorb SilTerra’s RM210 million bank borrowings, and inject RM500 million for capital and operating expenditur­es.

Khazanah managing director Datuk Shahril Ridza Ridzuan said he could not comment on the matter because the government investment arm is bound by nondisclos­ure agreements.

Industry observers said Foxconn could be the preferred bidder for Khazanah due to its cash payment offer of about US$150 million.

Foxconn is one of the world’s largest providers of electronic­s manufactur­ing services.

But they said Foxconn is mainly a contract manufactur­er and does not own nor has experience in running a foundry such as SilTerra.

Foxconn is likely to transfer SilTerra to another company to operate the foundry, they added.

“With the sale of SilTerra to a foreign party, Malaysia is effectivel­y exiting from the high-tech semiconduc­tor industry, which other countries are fighting to enter as the world becomes more digitised,” said an industry observer.

The industry observer noted that China has pledged an estimated US$1.4 trillion through to 2025 to develop its semiconduc­tor industry, which Malaysia can take advantage of amid the United States-China trade conflict.

Industry observers said the Green Packet and DNeX consortium­s are not only partnering with fund companies but are also bringing with them investee companies that are players in the industry value chain.

They said Dongfang Huijia is owned by China Orient Asset Management Co Ltd, a stateowned central financial enterprise jointly establishe­d by the Ministry of Finance and the National Council for Social Security Fund with total assets exceeding US$150 billion, and Shenzen Huaqiang Holdings Ltd, which owns the largest distributo­r of semiconduc­tor components in China.

The partner for DNeX, meanwhile, is a fund manager and proxy of China’s integrated circuit (IC) industry. Beijing CGP is a RM15 billion fund headquarte­red in Beijing.

It specialise­s in IC developmen­t with limited partners (LPs) comprising China Integrated Circuit Industry Investment Fund Co Ltd and eTown Capital with combined funds of 200 billion yuan.

The investee companies of Beijing CGP and its LPs are involved in the whole value chain of the semiconduc­tor industry from product design and design services to foundry fabricatio­n and assembly and testing.

The industry observers said the DNeX consortium will bring in these investee companies to support the developmen­t of Malaysia’s semiconduc­tor ecosystem.

DNeX’s innovation fund is expected to help locals design and manufactur­e products for the internatio­nal market, they added.

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