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Perfect timing for DNeX

PETALING JAYA: Dagang Nexchange Bhd’s (DNeX) acquisition of Khazanah Nasional Bhd’s loss-making semiconductor unit, Silterra, is considered timely, given the global chip shortage caused by the global Covid-19 pandemic.

An analyst said global demand for chips will provide the much-needed impetus for DneX to turn around Silterra.

“The global pandemic last year saw consumers stocking up on items such as laptops and other electronic devices, which resulted in inventories being squeezed.

“Furthermore, many people bought more cars than initially projected, during a time when most auto companies were forced to shut down production as a result of government-imposed lockdowns. This strained supplies further,” he said.

According to the Semiconductor Industry Association, global semiconductor sales are projected to increase 5.1% in 2020 to US$433.1bil (RM1.76 trillion) from US$412.3bil (RM1.67 trillion) in 2019, followed by an increase of 8.4% in 2021.

DNeX announced on Wednesday that it had teamed up with Beijing Integrated Circuit Advanced Manufacturing and High-End Equipment Equity Investment Fund Centre (CGP Fund) to acquire Silterra for RM273mil.

DNeX said it would acquire a 60% equity interest in Silterra while CGP Fund would acquire the remaining 40%.

“The purchase consideration for DNeX’s 60% stake will amount to about RM163.8mil, which will be funded through a combination of proceeds to be raised from a proposed private placement, internally generated funds and or borrowings.

“The acquisition is expected to be completed by the end of the second quarter of 2021, with the capital injection expected to be within 180 days thereafter,” it said.

DNeX said the acquisition is part of its expansion and diversification plan.

Separately in a filing with Bursa Malaysia yesterday, DNeX said it had issued 16.6 million new shares at 50 sen each from a warrant exercise that will be listed today.

Following the issuance of the new shares, DNeX’s latest issued share capital will stand at 2.24 billion shares.

Silterra, which was initially known as Wafer Technology Sdn Bhd, was conceptualised in 1995 and officially launched in 2001.

When it started to hit 100% capacity beginning 2007, Khazanah stopped pumping in funds. Despite Silterra’s strong manufacturing capacity with its existing facilities, it has not been able to run efficiently, with staff costs alone running to RM130mil annually.

For the first half of 2020, Silterra’s losses came up to RM172mil on the back of a revenue of RM397mil while its reserves were at a negative amount of RM1.8bil.

Khazanah has pumped in more than RM2bil into Silterra over the years, which has posted accumulated losses of more than RM8bil.

Khazanah has been trying to sell off the loss-making chip maker since 2008.

Previous bids had attracted the likes of China’s largest chipmaker Semiconductor Manufacturing International Corp and Taiwan’s No. 2 United Microelectronics Corp, before Khazanah decided that it wanted to dispose of Silterra to a local player.

After three failed attempts, when the sovereign wealth fund opened up Silterra for sale again last year, Nuglobal Ventures Sdn Bhd and DNeX emerged as the frontrunners.

However, the process took on a bit of a twist when Khazanah decided to invite foreign investors to the bid, which attracted the likes of Taiwanese electronics manufacturer Foxconn and German-based X-Fab.

Khazanah would subsequently decide against selling outright to foreign owners, but only to those that have formed partnerships with local firms.

DneX shares finished higher by 1.5 sen to 92.5 sen at yesterday’s close.


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