Circuit board manufacturer APCT, Inc. announced its acquisition of Advanced Circuits, Inc. in an all cash merger valued at $220 million. APCT is a leading manufacturer of printed circuit boards – a booming market that feeds the demand of semiconductor and electrical technology industries. APCT is based in California with a “global supply chain network with facilities in Japan, South Korea, Southeast Asia, Taiwan, Northern & Southern China and Hong Kong.”
The semiconductor industry and its supply chain have become a flashpoint in geopolitics as the United States and China wage a “chip war” to lead the future of technology. Everything from military drones, to car manufacturers’ machines, to the phones in everyone’s pockets are dependent on computer chips. As Taylor Dorrell of Business Insider phrases it, “[i]f the first Cold War was defined by the development of nuclear weapons, this Tech Cold War is defined by the computer chip.”
Supply chain shortages during the pandemic highlighted both how delicate and integrated the global chip supply chain is; however, even as global commerce has emerged from the pandemic, another fear has arisen: that China may attack Taiwan. China has long described democratic Taiwan as a breakaway province and has recently ramped up military pressure for the island’s 23 million people to accept Beijing’s sovereignty. While the United States does not officially recognize Taiwan’s independence, it has repeatedly vowed to help the island to defend itself and has sold advanced weapons, infuriating China.
Taiwan dominates global chip fabrication, producing 90% of the highest end chips. The Taiwan Semiconductor Manufacturing Company’s central place in developing such a crucial component of the global economy means that any political or military action that throws production offline would have a massive ripple effect across the world: halting worldwide production of everything from consumer electronics to cars. This would be perhaps the largest shock to the global economy in history.
At the same time, the United States has worked to build its homegrown capacity. In 2022, the nation passed the CHIPS and Science Act to “strengthen American manufacturing, supply chains, and national security, and invest in research and development, science and technology, and the workforce of the future to keep the United States the leader in the industries of tomorrow….” The printed circuit boards that APCT makes is a critical component of semiconductors and ties into this broader initiative.
Both companies are subsidiaries of larger organizations: APCT, Inc. is a portfolio company of Industrial Growth Partners and Advanced Circuits is a subsidiary Compass AC Holdings, Inc., which itself is majority owned by publicly traded Compass Diversified (NYSE: CODI). APCT is advised by Kirkland & Ellis LLP while Compass AC Holdings is advised by Ropes & Gray LLP.