China’s Tsinghua Unigroup Ltd (清華紫光) plans to invest 300 billion yuan (US$47 billion) over the next five years in a bid to become the world’s third-biggest chipmaker, the chairman of the state-backed technology conglomerate said yesterday.
Tsinghua Unigroup chairman Zhao Weiguo (趙偉國) also said that the company controlled by Tsinghua University (清華大學), which counts Chinese President Xi Jinping (習近平) among its alumni, was in talks with a US-based company involved in the chip industry.
A deal could be finalized as early as the end of this month, he said. He declined to give more details, but said buying a majority stake was unlikely as it was too “sensitive” for the US government.
“If you cannot be the top-three giant, it will be very hard to develop your business in the chip industry,” Zhao said, citing reports that China imported more chips than crude oil every year. “The next five years is key... There is an enormous market out there.”
Qualcomm Inc holds the No. 3 position in the global chip rankings, behind Samsung Electronics Co Ltd and market leader Intel Corp, which has a market capitalization of US$151.5 billion.
The sheer size of Tsinghua Unigroup’s planned investments is almost equal to Intel’s US$50 billion chip revenue last year and could disrupt the NAND chip industry. The top five chipmakers control more than 90 percent of the global NAND chip market after years of boom-and-bust squeezed out smaller players.
Tsinghua Unigroup’s investment drive comes after a two-year dealmaking campaign to bolster China’s fledgling chip industry, seen as a strategic priority for the Chinese government.
Beijing is keen to end China’s reliance on foreign semiconductors as it seeks to build modern, digitized armed forces capable of matching other advanced militaries.
It has also attached strategic importance to the development of domestic semiconductor, server and networking equipment industries amid fears of foreign cyberspying.
Tsinghua Unigroup has spent more than US$9.4 billion making acquisitions and investments domestically and internationally over the past two years, including the purchase of stakes in US data storage company Western Digital Corp and Taiwan’s Powertech Technology Inc (力成).
In August, it made an informal US$23 billion takeover offer for US giant Micron Technology Inc that was rejected out-of-hand by the Idaho-based chipmaker amid concerns a deal might endanger national security.
Tsinghua’s failed bid to buy Micron suggests it is serious about expanding in NAND chips, used for storing music, pictures and other data on mobile devices.
The global chip market was worth US$355 billion last year, according to research firm IHS Technology.
Tsinghua Unigroup, which had revenue last year of about 12.3 billion yuan, was also in talks about cooperating with a “world-class memorychip giant” to build a new chip factory in China, Zhao said, a move that could help his company acquire intellectual property needed to manufacture memory chips.
The 90-billion-yuan factory would help meet fast-growing demand of NAND memory chips.
“We do not have plans for DRAM at the moment,” Zhao said, referring to dynamic random access memory (DRAM) chips that are used mostly in personal computers. “We need to take one step at a time.”
The company was also suspending plans to invest in Taiwanese tech firms due to regulatory hurdles, after agreeing to take a stake in Powertech Technology Inc and expressing interest in more cross-strait deals.
Industry analysts had expected Tsinghua Unigroup to make further investment in Taiwan, sparking fears in the nation that its chip sector might fall prey to China’s state-backed drive to become a world-class player.
“The regulations do not allow it, so what is the point of talking [to Taiwanese firms]?” Zhao said, adding that Tsinghua Unigroup was focused on investing in the US.
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