Categories: AmbitionsChina's

China’s Chip Ambitions Fade as Chip Giant Faces Bankruptcy

Tsinghua Unigroup, a Chinese state-backed chip maker, said it received court notice that one of its creditors had initiated bankruptcy proceedings for the group, dated July 12.

Tsinghua Unigroup is a commercial arm of China’s Tsinghua University and an integral part of Chinese Leader Xi Jinping’s semiconductor self-reliance dream. One of its creditors had requested the court to initiate bankruptcy and reorganization proceedings due to Tsinghua Unigroup’s failure to repay debts and its glaring insolvency.

The company is a key member of China’s microchip national team.

According to a Unigroup filing to the Shanghai Stock Exchange, the creditor who requested the court proceedings was Huishang Bank Corporation Limited, a Hong Kong-listed bank based in Anhui, China. On Nov. 16, 2020, Tsinghua Unigroup defaulted on $198 million in bonds, resulting in a credit downgrade. And at least six more of its bonds had defaulted by June of this year, the group disclosed.

Tsinghua Unigroup is a semiconductor conglomerate under Tsinghua Holdings Co., a wholly-owned subsidiary of Tsinghua University. It was founded in 1988. Tsinghua Holdings owns 51 percent of Tsinghua Unigroup, and its Chairman Zhao Weiguo’s management firm holds the remaining 49 percent.

With the Chinese Communist Party (CCP) support, Tsinghua Unigroup began acquiring and merging semiconductor-related technology companies in 2013. It has formed a large semiconductor conglomerate, one of China’s largest, with 286 consolidated subsidiaries in just a few years and accumulated nearly $ 46.4 billion in assets.

Its subsidiaries include Tsinghua Unisplendour, Unigroup Guoxin Microelectronics Co., UNISOC, and Yangtze Memory Technology Corp (YMTC).

Although backed by the CCP and the prestigious Tsinghua University, Tsinghua Unigroup’s subsidiary companies didn’t utilize the university’s technological capabilities for research and development. Instead, they focused on acquiring technology companies.

Tsinghua Unigroup Uses ‘Merger and Acquisition’ as a Short-cut

In 2013, Tsinghua Unigroup and its subsidiaries started their large-scale merger and acquisition strategy. The group spent $1.78 billion and $910 million in 2013 and 2014 to acquire two IC design companies listed in the United States, Spreadtrum Communications and RDA Microelectronics. It then merged them into UNISOC, a company that designs and produces mobile phone chipsets.

“Research and development do not enable us to obtain intellectual properties and IT patents quickly. Even if you can do it, you can’t break through the patents. What I want is to change the way the game is played,” Tsinghua Unigroup Chairman Zhao Weiguo said on China’s CCTV in November 2017. “The acquisition of Spreadtrum and RDA allows Unigroup to enter the field of mobile chip and quickly position ourselves as world’s third.”

However, UNISOC’s mobile chip business has long been concentrated in the low-end market and is reportedly popular in the African market. UNISOC’s latest 6nm 5G chipsets are still produced by TSMC, a semiconductor manufacturing company in Taiwan.

In 2015, Tsinghua Unigroup allocated another US$3.775 billion in an attempt to acquire stakes in Western Digital Corp. (WD), a U.S. hard drive manufacturer, but ultimately failed. In July of the same year, it again made an unsuccessful $23 billion sky-high bid for U.S. memory-chip maker Micron Technology Inc.

After that, Tsinghua Unigroup launched merger and acquisition bids for some Taiwan’s semiconductor companies. From October to December 2015, it allocated more than $3 billion in an attempt to acquire shares in Taiwan’s three major IC pac

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