What's behind Zilia’s US$120mn Brazil semico… – BNamericas English
Brazil’s Zilia, formerly called Smart Modular Technologies, will invest 650mn reais (US$120mn) to expand production of semiconductors, boosted by a new controlling investor and amid potential new incentives for the sector.
“We expect the approval of the new incentive program for semiconductors in Brazil soon. The bill is about to be voted on in congress, it has support from all parties. It will be a great boost for the sector,” Rogério Nunes, president of Zilia and head of Brazil’s semiconductors association Abisemi, told BNamericas.
Zilia is short for ‘Brazilian’, explains Nunes. The brand name came about last December.
“We wanted to emphasize that we are both a national and global company at the same time,” he said. Besides, the name Smart Modular is the same as that of another company belonging to its former controller.
Smart Modular Technologies do Brasil was under the umbrella of US company SGH.
In June last year, China’s Longsys, through its Dutch subsidiary Lexar Europe, announced the acquisition of 81% of Smart Modular for around US$166mn.
SGH retained a 19% stake in Smart/Zilia. During three windows, between 2027 and 2029, the parties will have the option to buy/sell this residual stake.
That’s why Nunes says the company’s capital is now split among “Americans, Chinese and Europeans.”
In the transaction, Lexar Europe was advised by law firms Pinheiro Neto Advogados and Sidley Austin.
SGH was advised by Machado Meyer Advogados and Latham & Watkins.
Nunes said the transaction produced synergies for all parties involved.
“SGH did not master the process of encapsulation and [board] testing like us or Longsys,” he said.
SGH, for its part, sought to refocus its business and geographies.
“The majority divestiture of our standards-based, commodity module business in Brazil will enable SGH to focus on our strategy of delivering high-performance, high-availability solutions to our enterprise customers,” SGH CEO Mark Adams said in a release at the time.
According to Adams, the transaction strengthened SGH’s financial position, “enabling us to increase our strategic investments in domestic research and development, and US-based production of advanced technologies.”
INVESTMENTS
The capex announced by Zilia, now under Longsys’ control, covers the period 2024-25.
Of the total investments, 475mn reais will be allocated to increasing the company’s production capacity.
The other 175mn reais will be allocated to RD&I, focusing on products, industrial processes and human resources.
Smart/Zilia has two factories, one in Atibaia, São Paulo state, and the other in Manaus (Amazonas).
The production area (clean room) at the Atibaia plant will be expanded by around 1,500m2 and will receive a new production line, in part dedicated to exports.
Both plants will receive new machines and equipment, which will be used both in the encapsulation and testing of new integrated circuits, and in the assembly of electronic devices based on semiconductors.
According to Zilia’s CEO, part of this machinery has already arrived, coming primarily from China, and another part should come soon. Nunes reports that certain equipment might take up to 10 months to arrive.
After this, a period of assembly, testing and production preparation is necessary before going full steam ahead.
NEARSHORING
Exports, says the executive, will take a little longer, as a period of validation of the products with end-customers is necessary.
Among the markets being targeted by Zilia are the US and Latin America.
By the end of this year, the company intends to begin exporting memory devices made in Brazil by Longsys’ Lexar and Foresee brands, in addition to producing other private label devices.
Nunes says expanding and diversifying the production of memory products in Brazil is a bet on nearshoring and friendshoring.
“Lexar is based in the United States [San Jose, California]. But its products were made in Asia. Now we produce them in Brazil, being able to participate in this process of decentralization of semiconductors in China,” he said.
PRODUCTION
Founded over 25 years, Smart/Zilia claims the lead among Brazilian companies in the production of semiconductor memory components, memory modules, solid-state data storage devices (SSDs) and connectivity modules for IoT.
Zilia’s products are used in electronic and communication devices, such as smartphones, desktops, notebooks, servers, storage systems, tablets and smart TVs.
As part of the fresh investments, Zilia is launching new components such as DDR5 and LPDDR5 memories, uMCP, UFS 4.0 and NandFlash, as well as new solutions in memory modules and other electronic devices, such as fourth and fifth generation SSDs, which Nunes says will allow Zilia’s definitive entry into the industrial storage segment.
Zilia also targets small, lower volume manufacturers to supply memory cards, portable SSDs for games and retail, he said.
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