French semiconductor company Linxens indirectly acquired by Chinese Ministry of Education

Headquartered in France and founded in 1979, Linxens is a world market leader in R&D, design, and manufacturing of micro-connectors. Linxens is the largest producer worldwide of smartcard devices,and has over 3.500 employees. Its products are used in a wide range of applications by smartcard manufacturers and chipmakers. Linxens makes the connectors crucial for communication between smart cards and electronic readers, supporting applications such as contactless payment, transport passes and building access. The company offers a complete range of RFID inlays and antennas, as well as packaging and testing. Linxens is a leading technology provider for 80%of the world’s population, covering sectors that include telecommunications, finance, transportation, hotels, e-governance, and Internet of Things (IoT).

New factory in China

In September 2019 – one year after the acquisition – Linxens announced the construction of a massive factory and research center in Tianjin, China. The construction plan required an investment of about 2.1 billion RMB (260 million euros) to establish the company’s largest production facility worldwide, with state-of-the-art technological and production capabilities that will utilize the company’s global R&D expertise and industry knowledge.

This new facility is set to be a key component of Unigroup’s chip and cloud production base. The base in Tianjin will include Unicloud’s headquarters, Linxens’ plant, and an incubation center for the chip and cloud businesses of Tsinghua Unigroup.

Mr. Shan Zefeng, Party Secretary of Tianjin Binhai High-Tech Zone, commented,

“Linxens’ construction of a world-class production facility for smart chip components will provide momentum for the city to become a major technology hub for the global chip and cloud sector.”

In 2015 Linxens was sold to CVC Capital Partners, a private-equity investor. In 2018 it was subsequently sold to Ziguang Liansheng which acquired the shares in Linxens for a total of €2200 million. Ziguang Lianshen was originally established in May 2018 with the specific purpose of acquiring Linxens. Ziguang Liansheng is ultimately controlled by the Tsinghua University.

Ziguang Liansheng as part of Tsinghua Unigroup

There are 5 shareholders in the newly established Ziguang Liansheng.

The largest shareholder is Tibet Ziguang Shicang Investment with 75% of the shares. This investment company is ultimately owned by Tsinghua University via Beijing Ziguang Capital Management, Ziguang Capital and Tsinghua Holdings. The ultimate controller of Tsinghua University is China’s Ministry of Education.

The other 4 shareholders all own smaller stakes:

• Zijin Haikuo (8,3%);
• Zijin Haiyue (8,3%);
• Hongfeng Capital (5,6%);
• Xinhua Equity Investment (2,8%).

The controlling shareholder of Zijin Haikuo and Zijin Haiyue (as mentioned above) is Weitao Electronics. This company is majority owned by Beijing Jiankun Investment Group, which is also the second-largest shareholder (49%) in Ziguang Group. Beijing Jiankun is (70%) owned by Zhao Weiguo. He is also the chief executive of Tsingua Holdings, and legal representative of Ziguang Group as well as Beijing Ziguang Capital Management.

The other shareholder mentioned in the list above, Hongfeng Capital, is owned by Oceanwide Investment and is ultimately controlled by three individuals.

The last shareholder mentioned, Xinhua Equity Investment, is owned by the Suzhou Industrial Park (SIP) Asset Management. Its largest shareholder (49,5%) is Xinxin Financial Leasing. This company serves under the direction of the state-owned National IC Fund (The Big Fund), which aims to spur domestic growth of chip development. It has previously been involved in several semiconductor acquisitions in Europe (for instance Anteryon in The Netherlands). Interestingly, the second shareholder in SIP Asset Management (49%) is controlled again by the Ziguang Group (which is part of Tsinghua Holding).

This complex, overlapping shareholder structure is indicative of hidden state influence, characteristic in Chinese corporate governance, to exert state ambitions into private markets.

When Linxens was acquired by Chinese investors, the main concern of employees was whether they would be able to keep their jobs. Yet, other concerns arose after the launch of the new facility and research center in Tianjin, as the Chinese state-controlled investors seemed to be increasing their influence in the company. President and CEO Christophe Duverne, however, stated in an interview at the time that Linxens would remain an autonomous company with the decision-making based in Europe.

Large acquisitions by Chinese investors have raised public conern in recent years. To reduce the risk of public turmoil influencing this deal, it was kept silent for over a month after it was signed while awaiting approval from regulators (Reuters).

Back in 2014, French finance minister Bruno Le Maire said that his government was happy to accept long-term investment from China, as long as French assets were not “looted”. In this case, the French regulators decided to let the Linxens bid materialize on the grounds that the company makes the “passive”, non-strategic components of chips, not fully assembled semiconductors. The US CFIUS framework did not have the chance to block the acquisition, because the group’s US operations were excluded from the takeover.

“We are moving from a financial shareholder to an industrial shareholder, present in particular in semiconductors and network equipment. We remain an autonomous company with our decision-making based in Europe”. – President and CEO Christophe Duverne (Interview L’Usine Nouvelle)