By Makiko Yamazaki and Ritsuko Shimizu
TOKYO (Reuters) - State-backed Japan Investment Corp (JIC) sees potential for more mergers and acquisitions in high-end corners of the chipmaking industry following its planned $6.4 billion buyout of materials maker JSR, the head of its private equity arm said.
The comments from JIC Capital CEO Shogo Ikeuchi signal a potential shakeup of an industry critical to everything from smartphones to artificial intelligence that is a lynchpin of economic security in the world's third-largest economy.
"We see potential in some speciality materials markets where JSR can win dominant positions by combining with other materials makers," Ikeuchi said in an interview.
"We believe that we can boost Japanese chip materials makers' global competitiveness by spurring industry consolidation," he added.
Ikeuchi said there are broad deal options because JSR's products are diverse. The company is involved in chipmaking from the front-end wafer fabrication process to the back-end chip packaging process.
The JSR deal is the latest of a series of increasingly muscular government steps to try to regain Japan's lead in advanced semiconductor production and maintain its edge as a maker of materials and tools used in their manufacture.
JSR is a top supplier of photoresists, which are light-sensitive chemicals used to etch patterns on wafers.
Ikeuchi also signalled JIC's appetite for more deals in chip-related industries, saying that its investment decisions were aligned with the trade ministry's policy and the semiconductor industry was critical for Japan.
He also cited chemicals, automotive components and healthcare as sectors where the government-backed fund could play a key role to foster consolidation.
In the chemicals industry, for example, Japan has "too many players making similar products that were once competitive but are now commoditised," Ikeuchi said. "Japanese companies will have a hard time ahead unless a certain degree of consolidation takes place."
JIC, overseen by the powerful trade ministry, was set up in 2018 to invest in Japanese companies to boost the nation's competitiveness.
While its predecessor, the Innovation Network (LON:NETW) Corp of Japan (INCJ), largely focused on cash-strapped or ailing firms, JIC has so far mostly invested in startups and venture capital funds.
Ikeuchi said JIC had revamped its investment decision making process to better scrutinise downside risks and would stay away from deals that just involved bailing out distressed companies.