Tsinghua Unigroup wants to become third largest chipmaker with billions of investment

Tsinghua Unigroup, a state-owned chipmaker, plans to invest 300 billion yuan over the next five years to become the world’s third-largest chip maker. This amounts to 43.8 billion euros.

Zhao Weiguo, chairman of Tsinghua Unigroup, announced the major investment plans to Reuters. Zhao says he is in talks with an American chip manufacturer and adds that a deal may be closed at the end of this month. He would not say with which party Tsinghua Unigroup is in talks. He does say that buying a majority share is unlikely, because it would be ‘too sensitive’ for the American government. Currently, Qualcomm is the world’s third largest chip manufacturer, Samsung Electronics is in second place and Intel is the market leader. “If you are not a top three giant, it will be very difficult to do good business in the chip industry,” Zhao said in the interview.

In July, Tsinghua Unigroup tried to take over the American chip manufacturer Micron with a bid of more than 21 billion euros. However, that takeover fell through, because the takeover would probably not be approved by regulators in the US. This is because of the presence of Micron chips in some American weapon systems.

In recent years, Tsinghua Unigroup has invested billions of euros and made several acquisitions. At the end of 2013, the company acquired Chinese chipmakers Spreadtrum and RDA Microelectronics, making it the largest chip manufacturer in China. Intel then took a 20 percent stake in Tsinghua Unigroup in 2014. Unigroup recently invested 3.5 billion euros in Western Digital and 553 million euros in Taiwanese Powertech Technology. It was also announced at the beginning of November that the group is allocating 8.8 billion euros for the construction of a memory chip factory.

In early November, rumors emerged that Tsinghua Unigroup would be interested in MediaTek. The Taiwanese chip manufacturer said in response to media reports that the company is open to a collaboration. However, Taiwan probably does not want to let its chip industry fall into the hands of China. Further plans to invest in Taiwan have been stalled, Zhao said, due to the hurdles raised by regulators. “The rules don’t allow it, so what’s the point of talking to Taiwanese companies?” Zhao asked Reuters.

Tsinghua Unigroup was founded in 1988 from Tsinghua University and is 51 percent owned by the Chinese state-owned company Tsinghua Holdings. The remaining 49 percent is owned by an investment group. The recent investments and announced intentions of Tshinghua Unigroup are in line with the plans of the Chinese government to replace as much foreign technology as possible with its own variants. That ‘replacement program’ should be completed in 2020.