Japanese chemicals outfit Mitsui Chemicals has agreed to buy chip materials specialist JSR in a deal worth approximately €10.4 billion, creating a semiconductor materials giant and giving its shareholders a nasty shock.
The deal, announced on Monday, is the largest acquisition in Japan’s chemicals industry and brings together two companies supplying materials essential to advanced chip manufacturing. The state-backed Development Bank of Japan will support it and contribute about €1.13 billion.
JSR is one of the world’s leading producers of photoresists, the light-sensitive chemicals used to transfer microscopic circuit patterns onto silicon wafers. Without them, even the most expensive lithography equipment would struggle to produce anything more useful than an extremely costly piece of industrial sculpture.
The company supplies materials used with ASML’s extreme ultraviolet (EUV) lithography machines, which are essential for manufacturing the most advanced processors. Its customers include TSMC, Samsung Electronics and Intel, according to Bloomberg. Mitsui Chemicals already makes semiconductor materials, including pellicles that protect photomasks from contamination during chip production.
Japan has long dominated several obscure but essential corners of semiconductor manufacturing. While Americans argue over GPUs and the Chinese try to catch up with advanced processors, Japanese chemical companies have made themselves indispensable to the factories that produce them.
However, the price of becoming indispensable appears to have frightened Mitsui’s investors. The acquisition values JSR at approximately €10.4 billion, including debt, while the equity purchase amounts to around €7.9 billion. Mitsui plans to finance the transaction through a €9.28 billion bridge loan from its banks and the Development Bank of Japan’s investment.
That is an impressive amount of borrowing for a company whose market capitalisation stood at approximately €3.76 billion before Monday’s trading. Mitsui’s shares fell 8.5 per cent following the announcement, extending losses suffered after Reuters identified it as JSR’s likely buyer last week. Investors appear unconvinced that borrowing heavily to buy a company considerably larger than its own market valuation is necessarily a brilliant idea.
Mitsui Chemicals chief executive Satoshi Ichimura defended the purchase as part of a broader business transformation. He said the transaction would accelerate changes to the company’s portfolio, extending beyond expanding its semiconductor materials operations. The company expects the acquisition to generate an additional €226 million in annual profit by 2035, although achieving that figure will require considerable restructuring.
Mitsui intends to dispose of JSR’s life sciences operations and other non-core businesses, concentrating investment on semiconductor materials. It hopes to restore its financial position within three years of completing the deal, which will likely reassure shareholders wondering how long they will have to pay for this shopping expedition.
The takeover is part of a broader Japanese government effort to consolidate the country’s semiconductor materials suppliers and prevent strategically important technologies from falling into foreign hands. Japan Investment Corporation, which operates under government oversight, bought JSR for approximately €5.09 billion in 2024 and took the company private. The original plan was to use JSR as a platform to further consolidate the country’s semiconductor materials industry.
Two years later, the investment fund has decided that selling the business to Mitsui offers a more attractive route. JIC Capital chief executive Shogo Ikeuchi said the fund had considered seven or eight potential buyers before selecting Mitsui. The decision was based on which company could provide a strong foundation for Japan’s semiconductor materials industry over the next five to 10 years.
The transaction would create Japan’s largest semiconductor materials supplier by sales, giving Mitsui a stronger position in an industry where supplying the chemicals needed to manufacture chips can be every bit as lucrative as making the processors themselves. While Nvidia and other chipmakers grab the headlines, the companies making the chemicals continue to collect money from practically everyone.
The acquisition is expected to close in the second half of Japan’s 2027 financial year, subject to regulatory approvals. Mitsui will hold all voting rights in JSR, while the Development Bank of Japan’s investment will be converted into non-voting preferred shares.
