Fairchild Semiconductor Philippines

The San Jose company's stock (NASDAQ:FCS) rose 3.52 percent to close at $21.19 Tuesday on the news.

Fairchild said a $21.70 per share, in-cash offer from a group led by China Resources Holdings Co. and Hua Capital Management would “reasonably be expected” to lead to a “superior” offer to buy the company.

The new offer values the company at about $2.46 billion, compared to the $2.4 billion value of the deal agreed to with Phoenix, Arizona-based ON Semiconductor.

The Fairchild statement on Tuesday is expected to open the door for talks between it and the Chinese group.

“We believe there is a meaningful probability that ON Semiconductor will raise its bid to $22 and perhaps higher, ” Rolland wrote.

But Kevin Cassidy, an analyst at Stifel Nicolaus & Co., told Bloomberg that it wouldn't be a good idea for ON to get into a bidding war.

“They just spent 15 years working out of debt and they would have to increase their debt again, ” Cassidy said. He has a hold recommendation on Fairchild and a buy rating for ON.

The competition for Fairchild comes amid a push by China to become a major supplier of semiconductors. It buys more than half the chips sold each year but doesn't have a domestic manufacturer in among the world's 10 biggest semiconductor companies.

There were about $110 billion in merger deals in the industry last year, including a bidding battle between Microsemi Corp. and Skyworks Solutions over PMC-Sierra Inc. Microsemi prevailed in that fight in a sale valued at about $2.5 billion.

Fairchild is one of the originators of the integrated circuit. Formed in 1957, it has operations in several U.S. states as well as in South Korea, Malaysia, China and the Philippines.

Fairchild, which has annual revenue of $1.4 billion, has been acquired twice before. Schlumberger bought it in 1979 before selling it to National Semiconductor in 1987. The company was spun off again in 1997.