China has taken its biggest step toward creating a national champion in global semiconductors with a planned US$13 billion private placement by an affiliate of Tsinghua Unigroup Ltd (清華紫光) to build a chip plant and fund expansion.
Raising cash will bankroll a move into the mainstream memory market for China, given Taiwanese producers lack enough capital for expansion, Tsinghua Unigroup president Zhao Weiguo (趙偉國) said in an e-mailed response to questions.
Affiliates of state-backed Tsinghua University, including Unigroup, are becoming the vehicle for China to wean itself off foreign semiconductor technology with an acquisition spree that includes a stake in Western Digital Corp.
As the country bulks up homegrown technology, the global chip industry is undergoing a seismic shift, with more than US$100 billion in deals pending or completed this year, according to data compiled by Bloomberg.
“The chip sector is entering the era of giants, with accelerating integration,” billionaire Zhao said. “During the process, capital will play an important role.”
China’s move to develop its technology is seen by the government as crucial to national security and is also intertwined with moves to make its economy less dependent on the smokestack industries that have underpinned its ascendance.
While the recent deals give Tsinghua scale, China’s ability to seriously challenge Samsung Electronics Co, Toshiba Corp and Micron Technology Inc in memory will come down to accessing technology, analysts at China International Capital Corp (CICC, 中國國際金融) said.
“China is capable of manufacturing semiconductors, but lacks mainstream DRAM and NAND flash technologies, which are possessed by international giants,” CICC analysts led by Andrew Lin (林榮彥) yesterday said in a report.
Tsinghua affiliate Tongfang Guoxin Electronics Co (同方國芯電子) will sell 80 billion yuan (US$13 billion) of stock to eight companies and employees in the placement, the company said in a filing to the Shenzhen Stock Exchange on Thursday.
Of the proceeds, 60 billion yuan will go toward a memorychip plant.
Among the eight companies buying shares, six are controlled by Tsinghua Holdings Co (清華控股), which will remain the controlling shareholder of Tongfang Guoxin after the deal, according to the filing.
The companies will purchase the shares with cash.
The money being raised is four times Tongfang’s 20 billion yuan market value when its shares were suspended last month. The stock yesterday surged by the 10 percent daily limit in Shenzhen.
“The new Tongfang Guoxin will be the only listed platform for semiconductors,” Zhao said. “In the future, it will be an important platform for Unigroup’s chip sector. Our goal is that we will develop Tongfang Guoxin as a global chip giant.”
Tsinghua’s acquisitive ways has seen it consider bidding for Micron, people familiar with the matter said in July.
Deals that have reached a formal stage include Tsinghua Unisplendour Corp’s (紫光) purchase of a US$3.8 billion stake in Western Digital and Unigroup’s acquisition of Spreadtrum Communications Inc (展訊) and RDA Microelectronics Inc (銳迪).
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