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China to buy 25% share in Taiwan's Powertech

Posted: 02 Nov 2015 ?? ?Print Version ?Bookmark and Share

Keywords:The Big Fund? shareholders? chip business?

Tsinghua Unigroup plans to buy a 25 per cent stake in Taiwan-based Powertech Technology for $600 million, showing China's unrelenting effort to buy its way into the global semiconductor market.

Powertech tests, packages and assembles integrated circuits (ICs), and is a key player for advanced assembly and testing services in Taiwan.

The deal will make China's state-backed technology conglomerate Tsinghua Unigroup the largest shareholder of Powertech. The two companies made the announcement on Oct. 30, but the deal still needs approval by Powertech shareholders and relevant regulatory authorities.

Tsinghua Unigroup's investment is expected to help Powertech expand its assembly capacity in Taiwan, develop advanced production processes and recruit staff. The partnership with Powertech is also believed to help bolster China's local semiconductor industry.

Tsinghua Unigroup's move reflects a national industrial policy shift under which China is making the chip business a priority.

The Chinese government last year put together the Sino IC Fund, now affectionately called "The Big Fund." It provides 120 billion RMB (roughly $20 billion), scheduled to be spent between 2014 and 2017. Additionally, local governments and private equity funds are pulling together 600 billion RMB (roughly $100 billion) to promote M&A and strategic acquisitions of foreign companies with key technologies.

Tsinghua Unigroup's investment thus far

China's private and local government-backed funds are aggressively pursuing opportunities for overseas investment, acquisitions and domestic development through mergers.

Tsinghua Unigroup, through its holding company, owns China's leading mobile phone chip company Spreadtrum Comunications. Tsinghua Unigroup played a pivotal role in the merger between Spreadtrum and RDA Microelectronics (based in Shanghai).

More than a year ago, Intel cut a deal with Tsinghua Unigroup. Intel agreed to invest up to $1.5 billion for a minority stake of the holding company, under Tsinghua Unigroup, that owns Spreadtrum Communications and RDA Microelectronics.

Tsinghua Unigroup's M&A activities have picked up momentum this year. In July, Tsinghua Unigroup, attempted to buy U.S. chipmaker Micron Technology Inc. for $23 billion.

The talk was rejected out-of-hand by Micron management, although sources say the Chinese side has not given up on a deal. Had it succeeded, the deal would have been the largest Chinese overseas takeover.

At the end of September, an arm of Tsinghua Unigroup said it would pay $3.78 billion for a 15-per cent stake in U.S. disc drive maker Western Digital Corp.

In October, the Chinese company hired Charles Kau, the head of Taiwan memory chipmaker Inotera Memories Inc., a joint venture between Micron and Taiwan's Nanya Technology Corp.

- Junko Yoshida
??EE Times U.S.

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