Business, Technology

China’s Tsinghua Group to Build Chip Empire

On Monday, the chairman of China’s Tsinghua Unigroup Ltd announced that the technology conglomerate that’s backed by the state is planning to invest about 300 billion yuan, which is equal to $47 billion, in the next five years in an attempt to become the third-biggest chipmaker in the world. In an interview in Beijing, the Chairman Zhao Weiguo also said that the company was conducting discussions with a company based in the US, which is also involved in the chip industry. The Chinese technology giant is under the control of Tsinghua University and its alumni also includes the President Xi Jinping.

The chairman said that they could end up finalizing the deal even in this month. He refused to provide more details about this venture, but he did say that it was unlikely that the company would purchase a majority stake because the US government would deem it to be too ‘sensitive’. During his interview, Zhao cited reports that China’s chip imports every year were far greater than crude oil. He asserted that developing a business in the chip industry would be immensely difficult if they couldn’t be one of the top three leaders. The chairman said that there was a huge market out there and the next five years would prove to be crucial.

As far as the current global chip rankings are concerned, the third spot is claimed by Qualcomm Inc. whereas the second spot is taken up by Samsung Electronics Co. As far as the market leader is concerned, Intel Corp has claimed the first spot and it has a market capitalization worth $151.5 billion. The huge size of the planned investment by Tsinghua Unigroup in the chip industry is almost the same as the $50 billion chip revenue that was earned by Intel last year. This could cause a huge disruption in the NAND chip industry.

More than 90% of the global NAND chip industry is controlled by the top five chipmakers and they had squeezed out the smaller companies after years of boom-and-bust. The investment drive of the Tsinghua Unigroup takes place after a campaign of two years in deal making for bolstering the fledgling Chinese chip industry. The Chinese government considers the chip industry as a strategic priorty. Beijing is earger to reduce the dependence of the country on foreign semiconductors as they aim to build modern and digitized armed forces that are equally capable as other advanced militaries.

More than $9.4 billion has been spent by the Tsinghua Unigroup in making investments and acquisitions in China and overseas for the last two years. This includes the acquisition of stakes in the Powertech Technology Inc. in Taiwan and Western Digital Company, the data storage firm in the US. An informal takeover offer was made by the company in August worth $23 billion for the Micron Technology Inc. based in the US, but the Idaho-based firm rejected the offer out of hand because it would give rise to concerns about national security. This bid indicates that Tsinghua is serious about investing in the NAND chip industry. 

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