China’s Semiconductor Giants to Combine Through Stock Swap
SHANGHAI – Dawning Information Industry Co (Sugon, 603019.SH) and Hygon Information Technology Co (688041.SH) disclosed comprehensive merger terms today, with both stocks resuming trading on June 10 after a two-week suspension. The landmark deal would create China’s largest domestic high-performance computing and server chip entity.
Transaction Structure
The all-stock merger features:
- Exchange ratio: 0.5525 Hygon shares per Sugon share
- Valuation: Sugon priced at ¥79.26/share, Hygon at ¥143.46/share
- Total consideration: ¥115.97 billion ($16B) for 100% of Sugon
- New shares issued: 808 million by Hygon to absorb 1.463 billion Sugon shares
Post-Merger Entity
Upon completion:
| Component | Outcome |
|---|---|
| Sugon | Will delist after asset/liability transfer |
| Hygon | Becomes successor entity with combined operations |
| Employees | All 18,000 staff retained under unified structure |
Strategic Rationale
The combination aims to:
- Integrate Sugon’s server manufacturing with Hygon’s x86 CPU designs
- Create end-to-end solutions for China’s cloud computing infrastructure
- Compete more effectively against international rivals like Intel and AMD
Approval Process Timeline
Key upcoming milestones:
- June 2025: Shareholder meetings for both companies
- Q3 2025: CSRC and antitrust reviews
- Q4 2025: Expected deal closure and Sugon delisting
Analysts note the merger comes as China accelerates domestic semiconductor development amid ongoing U.S. export controls. “This creates a national champion with complete supply chain capabilities,” said Bernstein tech analyst Li Houzhi. “The combined R&D budget could approach $2 billion annually.”
Both stocks resumed trading Monday morning, with Hygon shares opening 5.2% higher while Sugon gained 3.7% in early Shanghai session trading.
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