Attention Silicon Valley: Asian Conglomerates Are Here to Buy

News Analysis -- The shopping season seems to have just started and the prospective buyers are coming from Asia.

In the past few weeks, Toshiba, Taiwan Semiconductor Manufacturing Co. and Samsung have all announced plans to further expand into green technology, while two of them – Toshiba and TSMC – have said or strongly indicated that they will buy companies to make that happen. If you're at a Silicon Valley startup, this may be the exit plan du jour.

Kuniaki Kumamaru, general manager of Toshiba's New Lighting Systems Division, for instance, said at the Reuters Global Climate and Alternative Energy Summit that the Japanese giant may need to start buying LED companies to boost its market share.

Chip giant TSMC, meanwhile, said back in August said it wanted to enter the market for solar and efficient lighting and would start looking at acquisition candidates. It also set aside $50 million for "possible use in solar investments." Silicon Valley VCs say that TSMC's venture arm has been holding meeting with various Sand Hill Road firms. TSMC has a big spread sheet that lists technologies that the company is interested in and effectively is asking U.S. investors if they have anything that might fulfill their requirements.

Taiwanese papers are also stating that TSMC is allegedly discussing purchasing Lumiled Lighting, an LED group inside of Philips that Philips acquired from Hewlett-Packard in 2005. Philips has purchased over $5 billion worth of lighting companies since 2005, but the last two acquisitions have been for companies specializing in lighting controls and lighting fixtures.

Samsung, meanwhile, said it wants to be the world's leading provider of solar power by 2015. Samsung is one of the world leaders in LCD televisions and many of the manufacturing processes for LCD TVs are directly applicable to making thin-film solar cells. Unlike Toshiba and TSMC, Samsung did not discuss acquisitions.

The increased interest of the conglomerates in greentech makes sense on many levels. TSMC, Toshiba and Samsung are three of the biggest chipmakers on the planet and the hottest market for semiconductors right now is solar while the most promising growth market is solid state lighting. With the capital crunch, most lighting and solar startups will have difficulty raising money to build manufacturing facilities. Not only do the Asian conglomerates have factory capacity to spare, they also have sales channels, distribution networks, packaging and testing facilities.

Although some are already skeptical that Philips will sell Lumiled, it starts to become interesting when you consider that Lumiled is really a chip company. Philips could sell this division to TSMC and free itself from the burden of building fabs and concentrate instead on building control systems and fixtures. TSMC would likely be more than happy to supply Philips with chips.

The Asian conglomerates also often have strong local demand for their products as well as friendly local governments that will craft tax and subsidy policies. For several years, TSMC made more money after taxes than before, even in profitable years, because of accumulated tax credits.

So who might get bought? We've compiled a list here for lighting: Bridgelux, Luminus Devices and Renaissance Lighting are all likely prospects, although we must admit we have no direct evidence of any discussions. Some solar candidates are listed here.

Image courtesy Taiwan Semiconductor Manufacturing Co., Ltd.