US sanctions prompt King Yuan Electronics to exit China operations

Taiwan’s King Yuan Electronics Co (KYEC), one of the world’s largest semiconductor testing and packaging services firms, has divested its entire stake in a subsidiary at manufacturing hub Suzhou, in eastern Jiangsu province, as part of efforts to exit mainland China amid geopolitical tensions and cross-strait chip supply chain changes.

KYEC unit KYEC Microelectronics Co has disposed of its entire 92.16 per cent share in subsidiary King Long Technology (Suzhou) for 4.9 billion yuan (US$676 million) to a consortium that includes King Legacy Investments, LePower (HK), Anchor Light Holdings, Suzhou Industrial Park Industrial Investment Fund, TongFu Microelectronics Co, and the Shanghai State-owned Enterprises Integrated Improvement and Experiment Private Equity Fund Partnership, according to an April 26 announcement published on the KYEC website.

That deal is expected to be completed within the third quarter of this year. The funds raised will be used to invest in high-end testing technology and equipment “to meet the strong demand in artificial intelligence (AI), high-performance computing and related markets”, according to KYEC.

“The board of directors has made a decision to withdraw from [mainland] China’s semiconductor manufacturing business,” KYEC said.

The company, based in the northwestern city of Hsinchu in Taiwan, said its decision was based on the impact of the United States’ restrictions on mainland China’s semiconductor industry, which has led to changes in the cross-strait chip supply chain, and on intensified market competition.

The Taiwan-listed shares of KYEC closed up 3.56 per cent to NT$98.90 (US$3.03) on Monday.

KYEC did not immediately respond to a request for comment on the same day.

The company’s decision to exit its operations in mainland China show how intensifying US tech restrictions continue to affect the country’s manufacturing supply chain, which has prompted companies like Foxconn Technology Group, Taiwan Semiconductor Manufacturing Co and Intel to expand production in other markets.

The decision by KYEC to exit the mainland comes weeks after the Biden administration updated semiconductor-related export restrictions against China to close loopholes in previous curbs imposed last October, with the goal to prevent Beijing’s development of AI for military use.

KYEC was one of the first Taiwanese semiconductor firms to set up manufacturing on the mainland after China joined the World Trade Organization in December 2001.

As the demand for advanced semiconductors in China used in electric vehicles, cloud computing and AI applications continues to grow, Beijing has called for increased self-reliance on high-end technologies and support for domestic enterprises to acquire locally made chips. South China Morning Post