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Tsinghua Eyes Minority Stake in a US Company

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Nov. 25 2015, Updated 1:56 p.m. ET

Tsinghua continues its attempt to acquire stake in US semiconductor companies

In the previous part of the series, we saw that Micron Technology (MU) is ramping up its production in next-generation memory technology. Intel (INTC) is also expanding its memory business, and Tsinghua Unigroup is investing aggressively to pump up semiconductor manufacturing in China (FXI).

In an interview with Reuters, Tsinghua’s chairman Zhao Weiguo hinted that the company is in talks with a US-based chipmaker, and a deal is likely to be finalized by the end of November 2015. He didn’t reveal any further details but stated that national security concerns have made it difficult for the company to acquire a majority stake in a US-based company.

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Tsinghua’s $47 billion investment plan

Recently, Tsinghua announced plans to invest $47 billion over the next five years on acquisitions and on building a memory chip plant. The company aims to become the third largest chipmaker in the world but lacks IP (intellectual property). So it’s looking to acquire global semiconductor companies to get access to semiconductor IP.

Possible acquisition targets

This has raised questions about which company Tsinghua is eyeing for IP. There were rumors that Tsinghua could be looking at a joint venture with GlobalFoundries for that company’s 14-nanometer FinFET process technology. However, that deal is unlikely, as the technology license is owned by South Korea’s Samsung (SSNLF), and the country will raise concerns if a Chinese government-owned company tries to acquire the semiconductor company.

Some analysts believe that the troubled Advanced Micro Devices (AMD) could be a possible target for Tsinghua. In October 2015, AMD entered into a joint venture with China’s Nantong Fujitsu Microelectronics to build an assembly and testing plant in Malaysia. AMD has advanced CPU (central processing unit) and Radeon GPU (graphics processing unit) IP as well as an ARM license for server-class processors. Getting access to these IPs could put Tsinghua in competition with Samsung, TSMC (Taiwan Semiconductor Manufacturing Company), or Qualcomm.

There are also rumors that Tsinghua could still be in talks with Micron for a joint venture, if not an acquisition. The Chinese firm made a $23 billion offer to acquire Micron Technology in July 2015, but the deal was rejected by the U.S. government over national security concerns.

It will be interesting to see which US semiconductor company joins hands with Tsinghua. In the next part of this series, we’ll look at other threats that may pose a challenge to Micron Technology in the future.

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