Siliconware Precision Industries (SPIL) has announced that it has reached an agreement with Foxconn Electronics to form a strategic partnership through share swaps.

One Foxconn share will be exchanged for 2.34 SPIL shares in a deal that will make Foxconn the largest shareholder of SPIL.

After the exchange of shares and capital increase, Foxconn will hold 840.6 million SPIL shares, accounting for a 21.24% stake in SPIL. SPIL will then hold 359.23 million Foxconn shares, or a 2.2% stake.

The deal was aimed at fending off a tender offer bid from rival Advanced Semiconductor Engineering (ASE), analysts said. ASE announced recently that it plans to buy up a 25% stake in SPIL.

SPIL and Foxconn also said they will cooperate to develop advanced packaging technologies including SiP and integrated fan-out (InFO) wafer-level packaging (WLP) technology, as well as advanced packaging materials such as embedded substrates.

To meet increasing demand from the smartphone, IoT and wearable devices sectors, the partnership will seek to integrate wire-bounding and wafer-level packaging processes from SPIL and SMT, flexible PCBs and module assembly technologies from Foxconn, according to a SPIL statement.

In response, ASE said its plans to buy SPIL's shares through the open market remain unchanged despite the announcement of a tie-up between SPIL and Foxconn.

ASE stressed that its acquisition price of NT$45 per SPIL share presents a 34% premium over SPIL's closing price on August 21 when it announced the buying plan. In comparison, SPIL's share is priced at NT$37.86 in the stock swap with Foxconn, accounting for a premium of only 19%.