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Private equity investments in semiconductors soar in Q1

Global private equity deal value in the semiconductor industry surged in the first quarter, driven by a large transaction in mainland China, according to S&P Global Market Intelligence data.

The aggregate transaction value for private equity investments in the sector was $9.12 billion across 67 deals, far exceeding the first-quarter values in each of the previous three years.

A $7.09 billion funding round for Yangtze Memory Technologies Co. Ltd. accounted for nearly 80% of the total during the period.

For full-year 2022, the semiconductor industry pulled in $41.15 billion across 369 deals. A $30 billion joint investment agreement between Intel Corp. and Canada-based asset manager Brookfield Asset Management Inc. was mainly responsible for the outsized value.

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Total deal value in the first three months of 2023 was nearly three times that of the previous year's first quarter, when aggregate transaction value was $3.21 billion across 110 deals.

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From Jan. 1 to April 3, the Asia-Pacific region was the largest recipient of investment in the sector at $8.72 billion. Investments in the US and Canada followed with $310 million.

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Biggest deals

Mainland China accounted for seven of the top 10 semiconductor investments for the year to April 3.

Yangtze Memory's $7.09 billion round of funding was the biggest investment with private equity involvement. Investors include Huaxin Investment Management Co. Ltd. and Hubei Province Changjiang Industry Investment Group Co. Ltd.

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Mainland China investment growth

Mainland China investments in 2023 can be attributed in part to US policy decisions, said 451 principal research analyst John Abbott.

One aim of the August 2022 CHIPS Act, which funds the US domestic chip industry, is to ensure that recipients of the funds do not build certain facilities or engage in joint research or technology licensing in China and other countries of concern.

Likewise, the December 2022 expansion of the US entity list, a US export blacklist, added another 36 mainland China companies, including Yangtze Memory.

Mainland China has been investing in chip technology for decades, Abbott said, but still relies on other regions for advanced semiconductor equipment and expansion of the entity list puts additional pressure on blacklisted companies to develop domestic capacity.