KUALA LUMPUR (May 17): Dagang NeXchange Bhd (DNeX) has teamed up with a unit of Taiwanese giant Hon Hai Precision Industry Co Ltd (better known as Foxconn) to build and operate a wafer fabrication plant in Malaysia.

In a filing, DNeX said it has inked a memorandum of understanding (MoU) with Foxconn's wholly-owned subsidiary, Big Innovation Holdings Ltd (BIH), to set up a joint venture company for that purpose.

The proposal is to build and operate a 12-inch wafer fabrication plant here, capable of producing up to 40,000 wafers per month in 28-nanometer and 40-nanometer technology.

"The entry into the MoU forms a basis of commitment between the company and BIH to undertake the agreed role and responsibilities in creating a mutual understanding of the strategy and business needs between the parties," DNeX said.

This will enable broader understanding for the benefits and opportunities of working with each other and create opportunities for future partnerships for the parties in relation to the proposed project, it added.

DNeX noted that the MoU is to be valid for a period of one year commencing from May 17, 2022, and may be further extended by mutual agreement by the parties.

The MoU came nearly a year after Foxconn emerged as a shareholder of DNeX, which itself expanded into the semiconductor space by taking over loss-making SilTerra Malaysia Sdn Bhd from Khazanah Nasional Bhd.

DNeX bought into SilTerra in mid-2021 through a 60:40 consortium with Beijing Integrated Circuit Advanced Manufacturing and High-End Equipment Equity Investment Fund Centre (CGP Fund). The entire SilTerra stake was sold by Khazanah for RM273 million.

Subsequently, Foxconn bought 120 million DNeX shares in June 2021, representing 5.03% stake for RM108 million or 90 sen per share. At the time, the move raised speculation that Foxconn was eyeing a direct stake in SilTerra.

That stake has since been diluted to 3.08% following a series of warrant conversions by July 2021 at 50 sen apiece, when DNeX's share price shot up to the 70-90 sen range upon winning the SilTerra bid.

In December 2021, DNeX said it was in talks with CGP and its shareholder Foxconn regarding SilTerra's expansion plan.

"Part of the discussions is for a big capacity upgrade at SilTerra, which Foxconn definitely wants to look into and invest in," DNeX group managing director Tan Sri Syed Zainal Abidin Syed Mohamed Tahir told reporters at the time.

He added that the group has excess land in Kulim, Kedah, which could fit another wafer plant block, for which it has initiated discussions with Foxconn and CGP Fund.

In the cumulative six months ended Dec 31, 2021, DNeX's technology industries division booked an operating profit of RM120.01 million on revenue of RM371.5 million, representing 56% and 59% of group operating profit and group revenue, respectively.

DNeX shares closed five sen or 5% higher at RM1.05, giving it a market capitalisation of RM3.31 billion. Year-to-date, the counter is up 29 sen or 38.16%.