Major Taiwan chip assembly and test firm KYEC to sell Jiangsu subsidiary, exit mainland China manufacturing amidst political tensions

One of the world’s 10 biggest outsourced semiconductor assembly and test (OSAT) contractors, King Yuan Electronics Co. (KYEC), is to divest its operations in mainland China, including its holdings in a subsidiary in the manufacturing hub of Suzhou in eastern Jiangsu province, the company said.

Taiwan-based KYEC said the decision was due to heightened political tensions between the US and China along with “intensified market competition”.

The move is the latest sign of major shifts in the semiconductor and electronics manufacturing supply chain in recent years, amidst increasingly strict US export controls targeting advanced chipmaking on the mainland.

“Due to the impact of geopolitics on the global semiconductor supply chain, such like United States’ restrictions on China’s semiconductor industry technology, the ecological environment of semiconductor manufacturing in China has changed,” KYEC said in a statement.

Political tensions

“The board of directors has made a decision to withdraw from China’s semiconductor manufacturing business,” the firm added.

The company said it was selling its 92.16 percent stake in subsidiary King Long Technology (Suzhou) for 4.9 billion yuan ($676m, £540m) to a consortium including 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.

It expects the deal to be completed within the third quarter of this year.

The firm said it plans to use the resulting funds to re-invest in growth areas such as artificial intelligence (AI) and high-performance computing (HPC), in which it currently has a minimal presence.

Diversification

KYEC’s shares closed up 3.56 percent on Monday following the news.

Tensions with China have recently led major Taiwanese manufacturers including Foxconn and TSMC, which both have extensive manufacturing bases in mainland China, to diversify into other regions including southeast Asia and the United States.