Japan state-supported fund to purchase JSR to improve the chip supply chain

June 27, 2023: On Monday, a fund backed by the Japanese state offered a $6.3 billion purchase of semiconductor materials giant JSR, underscoring the strategic emphasis countries worldwide are putting on the critical technology of chips.

The Japanese Investment Corp. proposed an offer of 4,350 Japanese yen share to buy JSR, which marks a 35% premium to Friday’s closing price.

JSR shares rallied more than 20% on Monday, hoping for the deal. JIC could put in a tender offer in December, the company said.

JSR is a significant presence in the semiconductor supply chain in an area known as photoresists, where Japan is one of the world leaders. Photoresists are light-sensitive materials needed as part of etching patterns into wafers. These ultimately are the design of the circuit of a chip.

“Japan wants to double down on its comparative advantage in materials needed for semiconductor manufacturing,” Pranay Kotasthane, chairperson of the high-tech geopolitics schedule at the Takshashila Institution.

The potential acquisition comes when semiconductors are front and center of a broader technology battle between the U.S. and China.

Last year, the U.S. announced sweeping export restrictions on semiconductor tools and specific chips to China. Countries such as the Netherlands, home to a critical chip company called ASML, and Japan followed suit with similar restrictions.

At the same time, the countryside is attempting to secure its supply chains and build up its domestic chip industries, focusing on areas where they are traditionally strong.

For Japan, that is with companies such as JSR in chemicals and materials.

“JIC’s investment in JSR means that the government might have a higher say over its decisions,” Kotasthane said. “Geopolitically, this would make China uneasy. Especially since Japan has gone along with its version of export controls against the Chinese semiconductor industry.”