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Tsinghua Unigroup to invest $47B to become third largest chipmaker

Posted: 17 Nov 2015 ?? ?Print Version ?Bookmark and Share

Keywords:acquisition? NAND? investment? chipmaker?

China's Tsinghua Unigroup intends to become the world's third-largest chipmaker by investing $47 billion over the next five years, according to a Reuters report.

Zhao Weiguo, chair of the state-backed conglomerate, told Reuters the company had approached a U.S.-based chipmaker and that a deal could be completed by the end of this month. Without going into details, he said acquiring a majority stake was not likely to happen since it was too "sensitive" for the U.S. government.

Zhao noted how being in the top three is critical in developing the business in the chip industry, adding that the next five years is key to the company's success. He also mentioned reports that China imports more chips than crude oil annually.

The top three companies in the global chip ranking to date are Intel, Samsung Electronics and Qualcomm, respectively. According to research firm IHS Technology, the global chip market was worth $355 billion last year.

Tsinghua's planned investmenta few billions shy of Intel's $50-billion chip revenue last yearcould shake the NAND chip industry, which is 90-per cent controlled by the top five chipmakers. NAND chips are used for storing music, photos and other data on mobile electronic devices such as smartphones and tablets.

The last two years saw Tsinghua spending more than $9.4 billion for acquisitions and investments both domestically and abroad. This includes stakes bought from Western Digital, a U.S. data storage company, and Taiwan's Powertech Technology.

Earlier this month, Tsinghua also expressed interest in MediaTek, a Taiwan-based fabless semiconductor company that provides system-on-chip solutions for wireless communications, HDTV, DVD and Blu-ray. However, Taiwanese law bans China from investing in local chip design companies.

The Chinese conglomerate also tried to buy Micron Technology for $23 billion in August, but it was rejected immediately due to national security concerns. This move, however, showed Tsinghua's determination to expand in the NAND chip market.

Pundits see these investments as a strategic priority for the Chinese government, which is serious about ending China's dependence on foreign semiconductors. The Asian giant is also planning to develop a digitised armed forces to match other advanced militaries. In addition, China plans to develop its server and networking equipment industries amidst concerns on cyber espionage.

- Stephen Padilla

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