05.04.2001
PCB mega-merger to see UMC team up with Hon Hai on China

• UMC (2303 'Lian Dian') announced that its 39%-owned subsidiary World Wiser (5363 'Xin Xing') is to acquire PCB rivals Unicap (5307 'Yao Wen'), Bestmult (unlisted), a 30%-owned subsidiary of Hon Hai Precision (2317 'Hon Hai') and 8%-owned by World Wiser, and UMTC (unlisted). The merged entity, UniMicron, is to become Taiwan's largest PCB maker.

• UMC's vertical integration into IC substrate is the most likely explanation for the merger. The merged entity will establish a production base in Beijing. UMC is also to team up with Hon Hai targeting the China handset manufacturing market. UMC will provide IC design capability and supply PCBs while Hon Hai may focus on components manufacturing and handset assembly. The two companies are also said to be in talks to build a semiconductor fab in China.

• The merger will also strengthen UMC's ties with top customer Xinlinx (US). Xinlinx accounts for 30% of Unipac's revenue and has recently been in talks to take a 10% equity stake in the latter. Xinlinx now plans to make a direct stake in the merged entity.

• The merged company's plan to issue European Convertible Bonds is currently underway.

• Please note that this comment is limited to the implications of the merger on UMC's strategy.

LindaLiu@Primasia.com +886-[0]2-2547-8867