U.S. chip gear maker – Applied Materials Inc (AMAT.O) on Monday agreed to purchase Japanese rival Kokusai Electric for $2.2 billion from KKR & Co Inc (KKR.N), as it bets on rising demand for memory chips utilized in data centers, 5G phones, and AI-powered devices.
The acquisition comes against the backdrop of an oversupply within the reminiscence chip market due to a drop in demand from smartphone makers that have shrunk the prices and weighed on sales of chipmaking equipment.
Applied Materials said the Kokusai deal does not require the approval of U.S. Justice Department, which had forced the company to scrap here its $10 billion takeovers of ’Japan’s Tokyo Electron Ltd (8035.T) in 2015.
However, the Kokusai acquisition could still be scrutinized by Chinese authorities given the ongoing trade tensions between the U.S. and China, which the last year derailed Qualcomm Inc’s (QCOM.O) $44 billion acquisition of NXP Semiconductors (NXPI.O).
As Kokusai is a small acquisition, the road to approval ought to be straightforward. However, China’s willingness from a political standpoint is always a threat, Evercore analysts stated.
Whereas the last major round of talks between the world’s two largest economies collapsed in Could, they agreed on Saturday to restart their trade negotiations.
Other than China, the acquisition will need approvals from Israel, Ireland, Japan, Korea, and Taiwan, Applied Materials Chief Financial Officer Dan Durn stated on a call with analysts.
The deal comes lower than two years after KKR took management of Hitachi Kokusai in a $2.2 billion deal. The Financial Times had reported in February that the personal equity agency was in talks with two Chinese consumers for the “full or partial” sale of the corporate.
The deal would push the U.S. firm’s share of the chipmaking equipment market to above 20% from 18%, based on the Nikkei, which had earlier reported on the deal.