<TABLE border=0 cellSpacing=0 cellPadding=0 width=452><TBODY><TR><TD vAlign=top width=452 colSpan=2>Published September 12, 2009
</TD></TR><TR><TD vAlign=top width=452 colSpan=2>Corporate Focus
</TD></TR><TR><TD vAlign=top width=452 colSpan=2>Can Chartered turn the corner under new owner?
Analysts say it'll still be an uphill battle for ATIC against the world's largest chipmaker, TSMC. By Winston Chai
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THE takeover of Chartered Semiconductor Manufacturing by Advanced Technology Investment Company (ATIC) will give the Singapore foundry more breathing room in the capital-draining business of wafer fabrication. However, industry watchers believe ATIC will still face an uphill battle against the world's largest chipmaker: Taiwan Semiconductor Manufacturing Co (TSMC)
Abu Dhabi-based ATIC launched a $2.5 billion bid for Chartered earlier this week by offering $2.68 per share under a scheme of arrangement. Besides paying cash for Chartered shares, ATIC will take over $3.1 billion in debt and convertible redeemable preference shares.
The deal is widely expected to sail through as Temasek Holdings, which controls 62 per cent of the Singapore group, has already given its blessings to the transaction.
ATIC currently owns a majority stake in Globalfoundries, a chipmaker spun off by computer processor maker Advanced Micro Devices (AMD) last year. With Chartered, the company will own six more chip plants in Singapore in addition to Globalfoundries' three facilities in Germany and the United States.
DBS analysts Tan Ai Teng and Suvro Sarkar said in their research note that the deal was 'certainly positive for Chartered considering the strategic fit with ATIC's Globalfoundries and the continuous capital outlays required in the future'.
Globalfoundries currently serves as AMD's primary chip supplier. The addition of Chartered will immediately add new customers including Microsoft and Broadcom while giving it room to woo more.
Scale is paramount in the commoditised business of making chips and with the ATIC buyout, Chartered can significantly raise its game, analysts say.
'For the first time, customers in the foundry industry will now gain access to a meaningful alternative from both a technology and capacity standpoint in the combined Globalfoundries-Chartered Semi entity,' said Macquarie Equities Research analyst Patrick Yau.
'Moreover, there could also be potentially more order flows from AMD to Chartered which the latter has the capacity to undertake since its utilisation rate remains below optimal levels,' according to analysts James Lin and Terence Wong from DMG & Partners.
On the flip side, however, the Chartered acquisition will weigh ATIC's portfolio down with another loss-making subsidiary. Globalfoundries is still struggling to break even since its formation. Chartered has suffered losses in five out of the nine years since listing on the Singapore Exchange (SGX) in 2000.
It has already made two cash calls in the last seven years to generate additional funds. In 2002, Chartered made an 8-for-10 rights issue to raise US$633 million. Earlier this year, it sought to raise another US$300 million by issuing 27-for-10 rights.
'I think it (the deal) is risky. Chartered is just kind of a little militia fighting against a full-fledged army,' Patrick Yang, an analyst with US-based Wedbush Morgan Securities, was quoted as saying in a Reuters report.
'The combined firm should be able to be a strong player in leading-edge chip production down the line, but we anticipate that TSMC will remain on the technological forefront over the next couple of years. The merger will likely have a greater effect on number-two foundry UMC, which has 16 per cent market share,' said Morningstar analyst Brian Colello. </TD></TR></TBODY></TABLE>
</TD></TR><TR><TD vAlign=top width=452 colSpan=2>Corporate Focus
</TD></TR><TR><TD vAlign=top width=452 colSpan=2>Can Chartered turn the corner under new owner?
Analysts say it'll still be an uphill battle for ATIC against the world's largest chipmaker, TSMC. By Winston Chai
<TABLE class=storyLinks border=0 cellSpacing=4 cellPadding=1 width=136 align=right><TBODY><TR class=font10><TD width=20 align=right>
</TD><TD>Email this article</TD></TR><TR class=font10><TD width=20 align=right>
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</TD><TD>Feedback</TD></TR></TBODY></TABLE>THE takeover of Chartered Semiconductor Manufacturing by Advanced Technology Investment Company (ATIC) will give the Singapore foundry more breathing room in the capital-draining business of wafer fabrication. However, industry watchers believe ATIC will still face an uphill battle against the world's largest chipmaker: Taiwan Semiconductor Manufacturing Co (TSMC)
Abu Dhabi-based ATIC launched a $2.5 billion bid for Chartered earlier this week by offering $2.68 per share under a scheme of arrangement. Besides paying cash for Chartered shares, ATIC will take over $3.1 billion in debt and convertible redeemable preference shares.
The deal is widely expected to sail through as Temasek Holdings, which controls 62 per cent of the Singapore group, has already given its blessings to the transaction.
ATIC currently owns a majority stake in Globalfoundries, a chipmaker spun off by computer processor maker Advanced Micro Devices (AMD) last year. With Chartered, the company will own six more chip plants in Singapore in addition to Globalfoundries' three facilities in Germany and the United States.
DBS analysts Tan Ai Teng and Suvro Sarkar said in their research note that the deal was 'certainly positive for Chartered considering the strategic fit with ATIC's Globalfoundries and the continuous capital outlays required in the future'.
Globalfoundries currently serves as AMD's primary chip supplier. The addition of Chartered will immediately add new customers including Microsoft and Broadcom while giving it room to woo more.
Scale is paramount in the commoditised business of making chips and with the ATIC buyout, Chartered can significantly raise its game, analysts say.
'For the first time, customers in the foundry industry will now gain access to a meaningful alternative from both a technology and capacity standpoint in the combined Globalfoundries-Chartered Semi entity,' said Macquarie Equities Research analyst Patrick Yau.
'Moreover, there could also be potentially more order flows from AMD to Chartered which the latter has the capacity to undertake since its utilisation rate remains below optimal levels,' according to analysts James Lin and Terence Wong from DMG & Partners.
On the flip side, however, the Chartered acquisition will weigh ATIC's portfolio down with another loss-making subsidiary. Globalfoundries is still struggling to break even since its formation. Chartered has suffered losses in five out of the nine years since listing on the Singapore Exchange (SGX) in 2000.
It has already made two cash calls in the last seven years to generate additional funds. In 2002, Chartered made an 8-for-10 rights issue to raise US$633 million. Earlier this year, it sought to raise another US$300 million by issuing 27-for-10 rights.
'I think it (the deal) is risky. Chartered is just kind of a little militia fighting against a full-fledged army,' Patrick Yang, an analyst with US-based Wedbush Morgan Securities, was quoted as saying in a Reuters report.
'The combined firm should be able to be a strong player in leading-edge chip production down the line, but we anticipate that TSMC will remain on the technological forefront over the next couple of years. The merger will likely have a greater effect on number-two foundry UMC, which has 16 per cent market share,' said Morningstar analyst Brian Colello. </TD></TR></TBODY></TABLE>
