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China seeks Micron buyout for $23B

Posted: 15 Jul 2015 ?? ?Print Version ?Bookmark and Share

Keywords:stock market? bid? smartphone?

China's Tsinghua Unigroup offered to buy Micron Technology for $23 billion, a move that will put the country at the forefront of semiconductors while possibly raising political issues in the United States leading up to the elections.

The Wall Street Journal reported the bid after close of the U.S. stock market. With $16.8 billion in revenues last year, Micron is the second largest chipmaker in the United States following Intel.

The deal makes sense for China but could become a political football in the United States where a presidential campaign is already in full swing.

China is trying to close a $150 billion trade deficit in semiconductors. It consumes a third of world's chips but only produces about 12 per cent of them.

Last year, China announced a $20 billion investment fund to develop its chip industry. Spending could be as high as $100 billion including contributions from provincial governments and the local industry.

Tsinghua Unigroup, an investment arm of Tsinghua University, has been on the forefront of the latest deals. It brokered the deal to merge Spreadtrum and RDA, two of the country's top players in mobile SoCs. The deal later attracted a $1.5 billion investment from Intel, which has long struggled to carve out a position for itself in smartphone chips.

Tsinghua likely will seek contributions from China federal and regional governments as part of the Micron bid, said Samuel Wang, a China analyst for market watcher Gartner. "It looks to me like a situation where they propose the deal first and find the funds later," Wang said.

Chip production

China produces only about 12 per cent of worldwide chips but uses about a third of them, says Gartner.

The Chinese government is contributing $200 million to a $780 million deal from a chip packaging company in Jiangsu province for STATS ChipPAC, a packaging specialist based in Singapore. It marks one of the first big checks written as part of the country's $20 billion semiconductor investment fund, said Allen Lu, president of the China branch of the SEMI trade group.

Earlier this year, Lu predicted China would invest in the memory chip business. He reiterated that prediction in a talk at the annual Semicon West event here minutes before the Micron reports hit.

China officials were said to have been in talks with Taiwan's Powerchip as well as the former CEO of Japan's Elpida in search of a deal on memory chips, said Gartner's Wang.


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