A consortium led by Chinese government-backed Beijing Jianguang Asset Management Co. Ltd (JAC Capital) has injected $9.4 billion into ailing Chinese chipmaker Tsinghua Unigroup, in a deal that will be appreciated by many big tech industry players.
Tsinghua Unigroup is a vast conglomerate that was spun out of Tsinghua University in Beijing and in 2015 had sufficient muscle to make a $23 billion bid for Micron Technology (which failed). The organization now consists of five units:
- Yangtze Memory Technologies – China’s first and leading manufacturer of NAND flash memory and as of this week subject of rumors that Apple may purchase its products;
- New H3C Technologies – An enterprise hardware company 49 per cent owned by HPE that was last year named as supporting China’s military and therefore off limits to US companies without prior approval from Washington;
- UNISOC Communications Co. – a smartphone chipmaker in which Intel once took a 20 per cent stake and struck a partnership to pursue a 5G modem chipsets – a business Chipzilla has since abandoned. Intel still has a stake in UNISOC;
- Guoxin Micro – A designer of memory, smart card chips, and other microelectronics kit;
- UniCloud Technology Co. – Offers smart city platforms and infrastructure.
All the activity described above turned Tsinghua Unigroup into a global memory player, but also saw it accumulate over $30 billion of debt that in July 2021 it struggled to service. It quickly became apparent that the company needed a significant injection of capital.
China’s desire to achieve self-sufficiency in semiconductors meant Beijing was not likely to let Tsinghua Unigroup fail, and a re-org was soon under way, with bids invited from interests willing to reinflate the company.
Interestingly, Alibaba’s bid to save the group was knocked back on grounds that it lacked semiconductor and manufacturing expertise – and perhaps also because Beijing has already signaled clearly that it wants Alibaba to stay in the ecommerce and cloud lanes it already dominates.
A team led by JAC Capital was asked to lead the bailout. A last-minute scare last Thursday – when the expected transfer of funds didn’t happen – turned out not to be a cause for alarm as the money showed up the next day.
Now for the hard part: making Tsinghua Unigroup great again.
China-watchers and chip-watchers will be especially interested to know if JAC’s help sees Tsinghua Unigroup revisit plans to build a pair of massive new chip fabrication plants, because the world is still short of silicon. HPE and US authorities will be keen to know what the new deal means for H3C. And Beijing will want its efforts, and investment, to advance its dreams of reducing dependence on imported silicon and know-how. ®