(Yicai) Oct. 8 -- Dalian Bio-Chem’s shares jumped by their daily trading limit after the Chinese maker of industrial fungicides said it will enter the semiconductor industry by acquiring a controlling interest in a Suzhou-based chip equipment company.

Dalian Bio-Chem [SHA: 603360] closed 10 percent higher at CNY17.20 (USD2.44) per share in Shanghai today. The benchmark Shanghai Stock Exchange Star 50 Index [SHA: 000688] surged 17.3 percent.

Shanghai Xinaohua Technology, a unit of Dalian Bio-Chem, will inject CNY700 million (USD99 million) into Wisdom Semiconductor Technology to obtain a 46.7 percent stake in the company, giving it 54.6 percent of the voting rights, the parent company said yesterday.

Long-established Wisdom Semiconductor has achieved fast growth, solid profits, and secure cash capital, a spokesperson from Dalian Bio-Chem told Yicai, so its acquisition will help the Dalian-based firm avoid cross-industry mergers and acquisitions risks.

The move is one of the first practical applications of China's newly relaxed regulations on cross-industry mergers and acquisitions. Chinese regulators released new regulations on Sept. 24, clearly supporting such M&A activity and allowing the acquisition of unprofitable assets.

Wisdom Semiconductor’s initial strategy was not focused on achieving profitability in the short term but rather on developing cutting-edge technologies, investing in research and development, and getting listed on Shanghai’s science and technology board.

But the company adjusted its strategy in the second half of last year to adapt to changes in the investment and financing environment. It split its wafer bonding gear business, which could not turn a profit in the short term, and expanded into the lithography remanufactured equipment business to boost profitability.

Wisdom Semiconductor reported a net loss of CNY33.7 million (USD4.8 million) and revenue of CNY172 million last year. But in the first half of this year, the firm logged a net profit of CNY86 million and revenue of CNY267 million, showing the effectiveness of the new strategy.

Wisdom Semiconductor aims to achieve net profits of over CNY100 million, CNY150 million, and CNY250 million this year, next year, and in 2026, respectively, reaching a total of more than CNY500 million over the three years.

Editor: Futura Costaglione