China imports up to US$200 billion worth of chips a year, an amount which is higher than comparable figures for imports of crude oil and raw materials. Since memory chips account for a high portion of its total IC imports, it offers a good reason for China-based Summitview Capital and other investors to acquire US-based DRAM design company Integrated Silicon Solution (ISSI). More essentially, the deal will fulfill China's long-term goal to build up technology related to memory chip production.

China already has needed technology for the production of semiconductor products, but lacks technology to manufacture mainstream DRAM and NAND flash chips, as major players in the industry including Samsung Electronics, Micron Technology, SK Hynix, Toshiba and SanDisk are not enthusiastic about seeing China-based concerns enter the memory space, particularly now that the DRAM industry is relatively stable and prices are steady following recent industry consolidations.

Without the entrance of China-based concerns, capacity ramps by the current top-three players are likely to be carried out appropriately without triggering drastic fluctuations in total supplies and prices. Meanwhile, the supply of NAND flash from the current top-four NAND flash vendors will also remain steady.

However, since it is a long-term goal as well as established policy of the China government to step into the memory industry, it has adopted a strategy to approach non-mainstream players to gradually build up its capabilities.

Under a definitive merger agreement signed between a consortium led by Summitview Capital and ISSI, the consortium will acquire all of the outstanding shares of ISSI for US$19.25 per share in cash. The total transaction value is likely to reach US$639.5 million.

The deal will help China fulfill its DRAM dreams, which could result in a significant impact to Taiwan-based DRAM chipmakers later on.

By: DocMemory
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