Chinese chipmaker Tsinghua Unigroup agrees $22bn in state financing

China leading the way for globalization and free trade with state-back replacement
of foreign imports. Oh..wait, what?

FT

Tsinghua Unigroup, the Chinese state-backed semiconductor group, has secured $22bn in new finances from government investors to fund acquisitions and help upgrade the country’s semiconductor industry.

Unigroup, which considered a $23bn bid for US chipmaker Micron in 2015, will receive Rmb100bn ($14.5bn) from China Development Bank and Rmb50bn from the National Integrated Circuit Industry Investment Fund, an investment group in part backed by the Ministry of Industry and Investment Technology.

The capital injection comes as China’s top leadership attempts to encourage its technology companies to stop using western-developed chips, of which China imports more in dollar terms than oil.

State-backed groups from China have sought to acquire overseas semiconductor rivals in the hope of bringing the technology back to domestic developers. But the effort has attracted harsh scrutiny from regulators in the US, who have blocked numerous transactions on the grounds that China’s expansion in the industry poses national security concerns.

The company did not provide details on how the cash is to be spent, other than that it will be used to upgrade China’s semiconductor business, bolster its competitiveness and “rapidly expand the scale of the industry”.

Unigroup, which was founded in 1993 by the Tsinghua University in Beijing, gained global recognition in 2015 when it said it was considering an offer for Micron for up to $23bn — what would have been the biggest cross-border acquisition for a Chinese group at the time.

The deal never happened, and the group was then involved in other high-profile efforts such as a $3.8bn bid for the US’s Western Digital, which fell apart in early 2016.

It has succeeded on a number of transactions, however. Since 2013, Unigroup has bought up domestic chipmakers, including Spreadtrum and RDA Microelectronics, and a 51 per cent stake in H3C from Hewlett-Packard for $2.3bn.

The US government has blocked a number of attempts by Chinese groups to acquire technology businesses, citing national security concerns, sometimes far beyond its own borders.

In early December, then-US President Barack Obama shot down a Chinese technology fund’s €670m purchase of German chip equipment maker Aixtron. Early last year, the US Committee on Foreign Investment blocked a $3bn offer from a Chinese consortium for a US-based lighting unit of the Dutch group Philips.

Capital set aside by state groups — so-called “corporate shadow capital” — helped lead to soaring valuations among Chinese companies in 2016. In an attempt to boost some of its ailing industrial sector, the Chinese government launched a $30bn venture capital fund last year aimed at upgrading technology in the sector.

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