Exclusive: China's Tsinghua Unigroup to invest $47 billion to build chip empire

Mon Nov 16, 2015 8:28am EST
 
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By Paul Carsten and Yimou Lee

BEIJING/HONG KONG (Reuters) - China's Tsinghua Unigroup Ltd plans to invest 300 billion yuan ($47 billion) over the next five years in a bid to become the world's third-biggest chipmaker, the chairman of the state-backed technology conglomerate said on Monday.

Chairman Zhao Weiguo also told Reuters in an interview in Beijing that the company controlled by Tsinghua University, which counts President Xi Jinping among its alumni, was in talks with a U.S.-based company involved in the chip industry.

A deal could be finalized as early as the end of this month, he said. He declined to give more details but said buying a majority stake was unlikely as it was too "sensitive" for the U.S. government.

"If you can't be the top-three giant, it will be very hard to develop your business in the chip industry," Zhao said, citing reports that China imported more chips than crude oil every year.

"The next five years is key... There is an enormous market out there."

Currently, Qualcomm Inc QCOM.O holds the No.3 position in the global chip rankings, behind Samsung Electronics Co Ltd 005930.KS and market leader Intel Corp INTC.O, which has a market capitalization of $151.5 billion.

The sheer size of Tsinghua Unigroup's planned investments is almost equal to Intel's $50 billion chip revenue last year and could disrupt the NAND chip industry. The top five chipmakers control more than 90 percent of the global NAND chip market after years of boom-and-bust squeezed out smaller players.

Tsinghua Unigroup's investment drive comes after a two-year deal-making campaign to bolster China's fledgling chip industry, seen as a strategic priority for the Chinese government.   Continued...

 
Tsinghua Unigroup logo is seen at its office in Beijing, China, November 15, 2015. REUTERS/Kim Kyung-Hoon