(Yicai) March 27 -- State-owned conglomerate China Resources Group will invest CNY11.7 billion (USD1.6 billion) to acquire 22.5 percent equity in JCET Group and take control of the leading Chinese integrated circuit packaging and testing services provider.

JCET’s share price [SHA:600584] was trading up 4.3 percent at CNY29.48 (USD4) as of 11.30 a.m., while shares in China Resources Microelectronics, the listed chipmaking arm of China Resources, [SHA:688396] were trading up 1.3 percent at CNY40.18.

Pan Shi Hong Kong, another subsidiary of China Resources, will pay CNY29 (USD4) per share to asset sellers, which include Semiconductor Manufacturing International Corporation and the China Integrated Circuit Industry Investment Fund, JCET said yesterday. This is a slight premium on the closing price of CNY28.25 on the last day before the Jiangyin-based firm halted trading on March 20.

The takeover will see China Resources take control of JCET, whilst before, the company’s shareholders were scattered and there was no actual controller, an industry insider told Yicai. This will give Shenzhen-based China Resources more leverage in the IC sector, which has a fine division of labor, a long industrial chain with many links and close ties between each link.

It will also help boost China Resource’s chipmaking business through its unit China Resources Microelectronics which also provides services including wafer manufacturing, packaging and testing.

JCET ranked third in the world last year in the chip packaging and testing market with a market share of 10.3 percent, behind only the US’ Amkor Technology with a 14.1 percent share and Taiwan’s ASE Holdings with 25.9 percent, according to the latest data.

But the downturn in the chip sector is putting JCET under pressure. The firm’s net profit plunged 60.3 percent in the first three quarters last year from a year earlier to CNY974 million (USD134.7 million), while revenue slumped 17.5 percent to CNY20.4 billion (USD2.8 billion).

JCET is slowing down the construction of some of its capacity expansion projects as demand for its main products slides, the firm said on March 17.

However, earlier this month, JCET said it is paying USD624 million for a 80 percent stake in a flash memory drive packaging and testing plant in Shanghai belonging to US data storage company Western Digital to boost the company’s long-term profitability.

Editor: Tang Shihua, Kim Taylor