Chinese supercomputer maker Sugon and chip developer Hygon call off merger plans

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high-performance computing sectors.The two Shanghai-listed companies late on Tuesday said they cancelled merger talks because "the market environment has changed significantly since the initial planning stages of this transaction". They added that "the conditions for implementing this major asset restructuring are not yet mature".During an online briefing with investors on Wednesday, Sugon and Hygon said the market changes referred to fluctuations in both companies' share prices over the past few months.Do you have questions about the biggest topics and trends from around the world? Get the answers with SCMP Knowledge, our new platform of curated content with explainers, FAQs, analyses and infographics brought to you by our award-winning team.They said the factors which affected their respective stocks included "changes in the domestic and international environment, the overall trend of the mainland share market, changes in the artificial intelligence industry's popularity and market expectations"."By not merging, Hygon can operate as an independent chip supplier, providing core computing chips to the entire domestic server industry," said Li Jun, general manager at Beijing-based Sugon, which is listed as Dawning Information Industry Co."Sugon, on the other hand, can collaborate with other chip companies as a server manufacturer," he added.The headquarters of Sugon is at the Zhongguancun Software Park in Beijing. Photo: Handout alt=The headquarters of Sugon is at the Zhongguancun Software Park in Beijing. Photo: Handout>The aborted merger has dashed industry expectations that Sugon and Hygon would create a major domestic ecosystem covering advanced processors and high-performance servers.The proposed merger, which was announced in late May, was expected to have a total transaction value of 116 billion yuan (US$16.4 billion), according to corporate announcements in June.Amid broad investor confidence in AI-related stocks in China, Sugon's shares had gained more than 45 per cent since the deal was announced, while Hygon's stock surged 60 per cent during the same period.Sugon's shares plunged by the daily limit of 10 per cent in Shanghai on Wednesday amid investors' reaction to the abandoned merger. 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