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Tsinghua's merger plan seen to boost China's chip industry

Posted: 18 Nov 2013 ?? ?Print Version ?Bookmark and Share

Keywords:Tsinghua Unigroup? MediaTek? Spreadtrum? RDA Microelectronics? merger?

Through Tsinghua Unigroup's initiative to acquire TD-SCDMA baseband chip vendor Spreadtrum Communications and China's RF IC firm RDA Microelectronics, domestic electronics companies are hopeful to finally get a consolidated entity strong enough to compete with Taiwan's MediaTek, if not quite an equivalent to Qualcomm in the U.S.

According to several sources in China's electronics industry EE Times talked to this week, getting acquired by Tsinghua Unigroup is the most logical and probably the best option left for Spreadtrum, which needs to compete with MediaTek on the high-end smartphone business while fighting off RDA on the low-end of the market.

Further, consider that both Spreadtrum and RDA are "competing in a low end market where the profit is razor thin and the market is declining," one Chinese executive noted. "The consolidation of the two companies is a good thing for China electronics." He expects to see this happen more in the future. The Chinese semiconductor industry, with a lot of smart people working but all of them competing on lower and lower margins, is not sustainable, he explained.

While many Chinese industry sources see the recent development positively, opinions differ about what comes next. Some Chinese executives view Tsinghua Unigroup's move as "a pure financial play," while others put more stock in a behind-the-scenes ploy by the Chinese government to strengthen China's electronics industry. Others even go further, predicting a doomsday scenario for other Chinese fabless companies such as Allwinner and Rockchip.

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