Hemlock Semiconductor purchases DuPont’s TCS segment for $550 million

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Hemlock Semiconductor purchases DuPont’s TCS segment for $550 million.
Image: Hemlock Semiconductor

Hemlock Semiconductor Corporation (HSC) recently announced it acquired DuPont’s trichlorosilane (TCS) business for $550 million. As part of the transaction, the vendor will assume control of DuPont’s Midland, Michigan-based TCS disposition plant. The chemical company noted its deal with HSC has already received regulatory approval.

Original equipment manufacturers (OEMs) utilize polysilicon when producing solar panels. Semiconductor companies also use the material to fabricate electronic components.

Why HSC Bought DuPont’s TCS Segment

As a manufacturer, HCS needs a consistent influx of raw materials to keep its production line going. Its purchase of DuPont’s TCS operations will stabilize an essential part of its supply chain. In addition, the company will enjoy significant cost savings by getting its polysilicon manufacturing precursor from a local source.

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CEO Mark Bassett explained HCS becoming an integrated manufacturer allows it to price offerings more competitively.

The executive also noted the DuPont deal would allow his company to reduce its carbon footprint.

Disruption Protection

Another advantage HCS gains by taking over DuPont’s TCS assets is gaining a measure of protection against international trade-related disruption.

In 2018, the semiconductor company wrote an open letter to the White House asking for consideration of its sector during the U.S.’s upcoming negotiations with China. Earlier in the decade, the Hemlock, Michigan-headquartered manufacturer lost access to the Sino market because of a dispute between superpowers. Consequently, HCS ceased construction on a $1.2 billion plant it had been building in Tennessee.

Two years later, Beijing and Washington agreed to tentative trade terms that would benefit the polysilicon U.S. sector. But with tensions flaring between the two nations once again, HCS could experience some revenue-affecting blowback.

That said, thanks to its recent acquisition, HCS will not have to worry about sourcing its TCS from a foreign vendor. That means the company can direct all of its energy to landing new clients in its domestic market. Given the unstable status of the post-coronavirus pandemic economy, the firm’s forthcoming price modifications should resonate with American OEMs.

Unfortunately, no manufacturer can dictate the progression of events like the Sino-American trade war. But HCS’s deal with DuPont shows semiconductor firms can be proactive about protecting their interests from potential disruption.

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