A Shenzhen-listed supplier of disposable hygiene materials has announced plans to buy almost all of a Ningbo-based semiconductor-materials company, underscoring how cash-rich mid‑cap manufacturers are pivoting into China’s strategic tech supply chains.
On January 18 Yanjiang Co. (SZ300658), known for topsheet nonwovens and PE films used in baby diapers and feminine hygiene products, disclosed a major-asset transaction to acquire 98.54% of Ningbo Yongqiang Technology. The deal is to be financed by a mix of share issuance and cash consideration, with the company also proposing a supporting share placement to entities controlled by its ultimate controllers to fund the cash portion.
Key deal mechanics remain unsettled: Yanjiang said audit and appraisal work on the target were not complete at the time the plan was filed and the final asset price has yet to be fixed. The buyers include He Jiangqi and 27 other sellers, and post-transaction He and an affiliated partnership are expected to hold a stake in the listed company exceeding 5%, making them potential related parties and turning the acquisition into a connected-transaction in the eyes of regulators and investors.
Yanjiang stressed the transaction will not change the company’s controlling shareholders. The group of controlling parties named in the filing — Xie Jihua, Xie Jiquan, Xie Shudong, Xie Daoping, Lin Binbin and Chen Zian — will remain intact after completion. The company also disclosed the recent death of one long-serving controller and director, Xie Yingqiu, who held 5.58% of the shares; Yanjiang says it will follow legal procedures to handle the stake and will refill board seats as required.
The move illustrates a wider, if uneven, trend in Chinese capital markets: firms with roots in traditional manufacturing are diversifying into semiconductors and related upstream segments, attracted by strong policy support, higher margins and investor interest in high-tech plays. For Yanjiang this is a large strategic leap from producing nonwoven fabrics to owning a company in the highly technical field of semiconductor materials.
That strategic logic comes with practical and governance risks. The lack of completed due diligence and an unset price introduces valuation and execution uncertainty. The financing design — issuing shares both to pay for assets and to raise matching funds from parties tied to the company’s controllers — raises potential concerns about related-party benefits and dilution for existing minority shareholders.
For Beijing’s industrial policy, deals like this are a double-edged sword. They can accelerate domestic capability-building in semiconductor inputs if the acquirers invest successfully and retain technical talent. But they also expose a sector that requires heavy R&D and long lead times to the vagaries of corporate restructuring, inflated valuations and opportunistic capital allocation by firms with little prior semiconductor experience.
Investors and regulators will be watching several near-term milestones: the completion and outcomes of the target’s audit and appraisal, regulatory sign-off on the related-party structure, details of the consideration and lock-ups for new shareholders, and whether Yanjiang presents a credible integration and investment plan for Yongqiang. The wider market impact will depend on whether this becomes a model for disciplined industrial upgrading or a flashpoint for governance scrutiny.