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Yageo and Hon Hai to Form a Semiconductor Joint Venture, XSemi

Yageo Group (TAIEX: 2327 TW) and Hon Hai Technology Group (TAIEX: 2317 TW) today announced to enter into a joint venture agreement to form XSemi Corporation (“XSemi”). The goal of this newly established joint venture is to extend the businesses into the semiconductor industry, including product development and sales. In the future, XSemi will be based in Hsinchu, Taiwan and consolidate the strengths and resources of the two market leaders, in addition to the upcoming multifaceted collaborations with leading semiconductor companies in product design, process and capacity planning, and sales channel. XSemi will create a complete semiconductor supply chain and provide customers total solution services with high-quality products and stable supplies.

Yageo and Hon Hai has developed and fine-tuned a superb strategy and operating model through their long-term cooperation. The partnership has created synergies through innovation and integration of services and resources, producing operation efficiencies and concreting growth for both conglomerates in a fast paced environment. The new joint venture XSemi will deepen their footprint in semiconductor, focusing on the development of semiconductor chips with average selling prices lower than US$2.00, in which they call it “Small IC”. So far, the two have started discussions with several global semiconductor companies, and will in the near future announce the collaboration plans in the semiconductor industry.

Young Liu, Chairman of Hon Hai, expresses his belief that “the semiconductor industry is facing the biggest upheaval in the past three decades, and the industry order will face a serious restructuring. Now is undoubtedly the best timing to initiate strategic partnerships in various segments.” Hon Hai has started its semiconductor strategy according to its mid-to-long term blueprints, making it one of the three core technologies for the conglomerate. Within its reach in the semiconductor supply chain, Hon Hai has built capabilities within semiconductor equipment, design services, IC design in 5G, AI, CIS (CMOS Image Sensors), and display driver, foundry fabs, and advanced packaging. This comprehensive portfolio will ride along Hon Hai’s long-term plan in the three major emerging industries in EV, digital health, and robotics, to enhance and vertically consolidate the industry supply chain.

XSemi‘s key product focus, small ICs, will become the most important element of Hon Hai’s future plan. It will not only create a steady semiconductor supply to the company’s current communication applications and future emerging technologies, but also fulfill the needs of its international customers, and ultimately enhance the company’s overall profitability.
Yageo’s strengths lie in efficient component production and process management, and it is known for comprehensive global sales channels. This new collaboration with Hon Hai could be seen as a natural extension and progression of the strategic alliance initiative with Hon Hai last year. This will not only fortify Hon Hai’s need for the key core components for EV and digital health, but also showcase Yageo’s forte in consolidation of resources.

After the acquisition of KEMET and Pulse, Yageo has put an emphasis on high-end product development to consolidate technologies and channels to be close to its customers. Yageo has extensive experiences in the key components of the creation of EV, including powertrain, battery management system, ADAS, on top of other high-end applications like digital health, industrial, and 5G technologies. 
Pierre Chen, Chairman of Yageo, believes that “Yageo aims to create a one-stop shop for its customers, and through this joint venture, we will further provide the services and products that meet customers’ need for supply chain optimization.” With the creation of XSemi, Yageo will further expand its footprints in passive components into semiconductors, offering an even more complete component portfolio, opening more room for growth in the future.

Pierre Chen, Chairman of Yageo Group and Young Liu, Chairman of Hon Hai Technology Group attended the signing ceremony and announced the partnership in person. The market for power semiconductors will reach US$40 billion by 2025, and analog semiconductors to US$25 billion. In an electric vehicle, the quantity share of small IC will be over 90% among all semiconductor components. The presence of the two chairmen signifies the importance of this joint venture to the development of both companies. With the combination of the complementary strengths, Yageo and Hon Hai look forward to creating a powerful semiconductor company in the industry.