BEIJING/HONG KONG, Nov 16: 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 finalised 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 per cent 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.
Beijing is keen to end China's reliance on foreign semiconductors as it seeks to build a modern, digitized armed forces capable of matching other advanced militaries.
It has also attached strategic importance to the development of domestic semiconductor, server and networking equipment industries amid fears of foreign cyberspying.
Tsinghua Unigroup has spent more than $9.4 billion making acquisitions and investments at home and abroad over the past two years, including the purchase of stakes in U.S. data storage company Western Digital Corp (WDC.O) and Taiwan's Powertech Technology Inc (6239.TW).
In August, it made an informal $23 billion takeover offer for U.S. giant Micron Technology Inc (MU.O) that was rejected out-of-hand by the Idaho-based chipmaker amid concerns a deal might endanger national security.
Tsinghua's failed bid to buy Micron suggests it is serious about expanding in NAND chips, used for storing music, pictures and other data on mobile devices. The global chip market was worth $355 billion last year, according to research firm IHS Technology. ?Reuters