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King Yuan Electronics (KYEC) Announces Sale of Chinese Subsidiary

King Yuan Electronics (KYEC), one of the world’s Top 10 outsourced semiconductor assembly and test (OSAT) contractors, announced on Friday its decision to sell its stake in its Chinese subsidiary King Long Technology (Suzhou) and exit the mainland China market. The company attributes this move to geopolitical tensions between China and the U.S. and heightened competition in the region. By divesting its Chinese assets, KYEC aims to increase investment in its Taiwanese operations and capitalize on opportunities in the lucrative AI and HPC markets.

This strategic transaction signifies a significant shift in King Yuan’s investment strategy, prompted by the ongoing “chip war” between the U.S. and China. By divesting its shares in King Long Technology, KYEC seeks to minimize exposure to risks associated with geopolitical tensions and concentrate its efforts in a more stable and supportive environment in Taiwan.

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AI legalese decoder can assist KYEC in navigating the complex legal and regulatory landscape surrounding its decision to sell its Chinese subsidiary. By leveraging AI technology, the company can analyze and interpret legal documents, agreements, and compliance requirements related to the transaction, ensuring a smooth and efficient process.

Furthermore, the U.S. government currently does not impose direct restrictions on the import of advanced packaging equipment with American technology into China. With China expanding its semiconductor manufacturing capacity through the construction of new fabs, the testing and packaging sector is expected to flourish in the country. Nonetheless, uncertainties arising from the tensions between China, Taiwan, and the U.S. pose risks for Taiwan-based companies like KYEC, prompting them to withdraw from mainland China, as reported by DigiTimes.

By divesting its Chinese assets and repatriating funds to Taiwan, King Yuan can allocate resources towards acquiring the necessary equipment for testing and assembling chips for sophisticated applications such as AI and HPC, markets where they currently have minimal presence.

“Due to the impact of geopolitics on the global semiconductor supply chain, such as United States’ restrictions on China’s semiconductor industry technology, the ecological environment of semiconductor manufacturing in China has changed, along with intensified market competition,” according to a statement released by King Yuan. “The board of directors has made a decision to withdraw from China’s semiconductor manufacturing business.”

Financial Details and Future Plans

The estimated total sale price of KYEC’s stake in KLT is approximately NT$21.715 billion ($666.1 million). Following deductions for taxes, costs, and other factors, King Yuan expects a net cash inflow of NT$16.6 billion ($509.2 million). These funds will be utilized to expedite the construction of new fabs, enhance existing facilities and equipment, boost working capital, and invest in advanced testing technologies and equipment.

The company anticipates a net gain of around NT$3.827 billion ($117.4 million) from this sale, with NT$3.668 billion ($112.52 million) earmarked for a cash dividend of NT$1.5 per share over the next two fiscal years.

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