Denso Proposes Acquisition of Rohm to Secure Semiconductor Supply

Denso Corp., a major Japanese auto parts supplier, has proposed acquiring Rohm Co., a prominent chipmaker, for approximately ¥1.3 trillion ($8.3 billion). This acquisition aims to enhance Denso's ability to secure power semiconductors, which are critical for the growing electric vehicle market. Rohm's shares surged 18% following the announcement, marking the largest increase in 26 years, while Denso's shares fell by 3.3%. The proposal was made in February and is currently under review by Rohm, which has established a special committee to evaluate the offer.

Denso Proposes Acquiring Chipmaker RohmBloombergDenso makes Y1.3tn bid to take over Rohm – report

The proposed acquisition reflects a broader trend among Japanese auto suppliers to consolidate their semiconductor supply chains amid increasing reliance on power semiconductors for electric vehicles. The global semiconductor shortage, exacerbated by geopolitical tensions and supply chain disruptions, has prompted automakers to seek stable sources of critical components. Denso's move to acquire Rohm is seen as a strategic effort to mitigate risks associated with semiconductor supply, particularly following the challenges faced by companies like Honda Motor Co., which had to revise its sales forecasts due to shortages.

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Denso currently holds a nearly 5% equity stake in Rohm, a position it has gradually increased since last year. The company has previously collaborated with other semiconductor firms, including Toshiba Corp. and Fuji Electric Co., to enhance its technological capabilities. The potential acquisition could lead to a significant restructuring within Japan's power semiconductor sector, as Denso aims to position itself as a leading player in this critical industry.

Denso Proposes Acquiring Chipmaker RohmBloombergDenso makes Y1.3tn bid to take over Rohm – report

Denso has publicly stated that it is considering various strategic options regarding its relationship with Rohm, including the possibility of purchasing additional shares. The company emphasized that no final decision has been made regarding the acquisition. Analysts suggest that Denso may need to increase its bid to successfully complete the transaction, given the competitive nature of the semiconductor market.

Bloomberg

While the acquisition proposal has been met with optimism from some investors, analysts caution that the consolidation of power semiconductor companies has been slow due to disagreements over leadership roles in potential mergers. Critics argue that the fragmented nature of the industry may complicate Denso's efforts to lead a successful acquisition of Rohm.

Bloomberg

As Rohm reviews Denso's proposal, the outcome of this potential acquisition could have significant implications for the semiconductor industry in Japan. The decision is expected to be closely monitored by market participants, as it may influence future consolidation trends within the sector.

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• “Consolidation among power semiconductor companies hasn’t progressed, partly because of a standoff over who would take the lead,” — Hideki Yasuda, Analyst at Toyo Securities Co.

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• “The prospect of Rohm being taken over is “a nice surprise” for investors, said Amir Anvarzadeh, Japan equity strategist at Asymmetric Advisors.” — Amir Anvarzadeh, Japan Equity Strategist at Asymmetric Advisors.

Bloomberg