Tsinghua Leads Creation of $2.8 Billion Chinese Chip Giant

  • New company will be one of the country’s largest chipmakers
  • Tsinghua chairman Zhao Weiguo will head up the new entity

Tsinghua Unigroup Ltd. merged its memory chip-making operations with Chinese government-run XMC’s, creating a $2.8 billion company to spearhead the country’s effort to become a global semiconductor player.

The company is folding XMC, also known as Wuhan Xinxin Semiconductor Manufacturing Corp., into its growing portfolio of assets and consolidating their production capacity, Tsinghua’s billionaire chairman Zhao Weiguo said via e-mail. The newly merged entity is called Changjiang Storage Co. and has a registered capital of 18.9 billion yuan ($2.8 billion), according to a website operated by the State Administration for Industry and Commerce.

Changjiang Storage will count among its shareholders the 138 billion-yuan National Integrated Circuit Industry Investment Fund Co., whose mandate is the development of a domestic chip sector and in which Tsinghua is an investor. Other shareholders include the provincial governments of Wuhan and Hubei, though the website didn’t list their stakes.

Zhao will become chairman of the new entity, he said. Tsinghua, an affiliate of the prestigious Beijing university of the same name, harbors ambitions of becoming a global player in semiconductors. It has pursued deals around the globe as the standard-bearer of China’s effort to build a local industry giant and wean the country off foreign technology. Its core business of semiconductors is seen by the nation’s political leadership as vital to national security.

The company is just one of several affiliates of state-backed Tsinghua University, the school that’s produced Chinese leaders from President Xi Jinping to his predecessor Hu Jintao. Other arms include Tsinghua Unisplendour Co. and Tsinghua Tongfang Co.

Together they’ve spearheaded a spate of high-profile acquisitions in recent years. Unigroup bought RDA Microelectronics Inc. and Spreadtrum Communications Inc., and came close to a potential $23 billion bid for Micron Technology Inc. But it withdrew from a $3.8 billion investment in Western Digital Corp. in the face of a U.S. security review.

Its latest target, XMC, began operations in 2008 and says it’s one of the largest players in domestic semiconductors. It’s unveiled plans to participate in the building of a $24 billion semiconductor manufacturing mega-complex that the government is establishing in its home province. XMC didn’t respond to a phone call seeking comment.

Closely held Unigroup had sales of 52 billion yuan ($8 billion) last year with an after-tax profit of 3.9 billion yuan, according to the company. In its chip design business, profit came to $200 million on sales of 13.5 billion yuan. Its target, XMC, began operations in 2008 as a foundry for memory chip and image sensor production.

— With assistance by Jonathan Browning

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