The €4.4 billion ($4.9 billion) transaction already had been approved by regulatory authorities in Europe (including Germany), the US, South Korea and Japan, though China’s green light was still outstanding. But even a range of incentives the prospective merger partners offered the German government in exchange for its blessing – including special voting rights— were not enough.

In a statement, Wacker CEO Christian Hartel said the company still intends to divest its remaining shareholding in the medium term and is “under no time pressure.” The wafers manufacturer, he added, “has performed extremely well in recent years.” Moreover, “it is excellently placed in terms of technology and is highly profitable, which makes the stake a financially accretive investment for us.”

Hartel said he “remains convinced” that the merger plans announced in 2020 “would have been in the best interests not only of both companies, but also of the German and European semiconductor industries.” The transaction, he said, “would have created an industry leader with strong roots in Europe and an extensive portfolio for supplying all its customers with cutting-edge products.”

Global Wafers’ CEO Doris Hsu remarked earlier that if German approval was not received in time, the companies would not reopen negotiations. Instead, the Taiwanese player – which now faces a breakup fee – would find other uses for the sum it had planned to pay Wacker. On Feb. 1, the company retracted that statement, and Hsu said she would announce new plans on Feb. 6.

Siltronic worth more as standalone company?

Siltronic CEO Christoph von Plotho told German newspaper FAZ that an unchanged offer would be “less attractive from today's perspective." A lot has changed,” he said. “Chips are scarce and prices are rising and the company’s capacities are well utilized.” One trader told the Reuters news agency that Siltronic could be worth more as a standalone business.

While Wacker questioned the ministry’s needing more than a year to make a decision, commentators stressed that the German government had not actively sought to torpedo the deal but rather postponed a decision. At least for the economics ministry, whose leaders have been in office for only a few weeks, some considerations remained unclear.

In light of the current shortage of semi-conductors in Europe, Berlin apparently fears that the region’s last wafers producer decamping to Asia could make supplies even harder to come by. Figures show that 90% of all silicon wafers measuring 300 mm in diameter are made in five countries, with all producers except Siltronic based in Asia. The market is led by Japan’s Shin- Etsu. GlobalWafers is in third place, followed by Siltronic. The merger would create a global number two.

To address supply concerns, Germany, whose automotive industry has been hit by the semiconductor shortage, last year tightened its information requirements for transactions involving sensitive technology. In another move to deal with the semiconductor shortage, the European Commission is trying to convince chips producers to set up shop in the EU 27.

Author: Dede Williams, Freelance Journalist