China's Tsinghua prepares whopping US$23bil bid for US chipmaker Micron

  • TECH
  • Wednesday, 15 Jul 2015

FEATHER IN ITS CAP: Tsinghua Unigroup wants to remain the champion for China's technology development by buying Micron.

BEIJING/SAN FRANCISCO: China's state-backed Tsinghua Unigroup Ltd is preparing a US$23bil (RM87.4bil) bid for US memory chipmaker Micron Technology Inc, in what would be the biggest Chinese takeover of a US company, people familiar with the matter said.

The technology conglomerate is prepared to bid US$21 (RM79.85) per share for Micron, a 19.3% premium to the stock's close on Monday. The offer could come as early as this evening, a person close to Tsinghua told Reuters, although a Micron spokesman said it had not received an offer.

A successful bid would consolidate Tsinghua Unigroup's position as a champion for China's technology development, after it struck deals and research partnerships with international firms in the semiconductor industry.

The company is controlled by Tsinghua University in Beijing, which counts President Xi Jinping among its alumni, and is backed by China's central government.

China has attached strategic importance to the development of domestic semiconductor, server and networking equipment industries amid fears of foreign cyberspying.

But any foreign takeover of Idaho-based Micron – the last major US-based manufacturer of DRAM chips used in personal computers – would likely have to pass a review by the Committee on Foreign Investment in the United States, which looks at the national security implications of such deals.

Vincent Gu, a Shanghai-based analyst at iSupply, said the chances of the US government approving the deal would be "next to zero" given the political hurdles. "It's difficult to purchase the critical technology. China should stay firmly grounded and persevere with researching the technology itself," Gu said.

Great leap

Micron makes both dynamic random access memory (DRAM) chips and NAND memory chips for storing music, pictures and other data on smartphones, cameras and other mobile devices.

Acquiring Micron's cutting-edge memory manufacturing technology would be a major advance for China's modest but improving chip industry headed by Tsinghua Unigroup.

With roots as a private equity fund, Tsinghua Unigroup transformed into a serious semiconductor player after it bought Chinese chipmakers RDA Microelectronics and Spreadtrum in deals totalling US$1.6bil (RM6.08bil) last year. When Tsinghua Unigroup received a US$1.5bil (RM5.7bil) investment from Intel Corp in October, the two sides pledged to cooperate on research and further Chinese technology.

The Wall Street Journal first reported early on Tuesday that Tsinghua Unigroup was prepared to submit a bid, citing people familiar with the matter.

Chip consolidation

None of the world's top memory chip manufacturers are based in China, although South Korea's SK Hynix has a plant in Wuxi and Samsung Electronics Co Ltd, the global market leader also from South Korea, last year began full-scale production at a new NAND chip factory in Xi'an.

Micron has manufacturing plants and a sales office in Taiwan, and indirectly holds a 20% stake in Inotera Memories Inc, a joint venture with Nanya Technology Corp. If Micron became a Chinese-owned company, Taiwanese rules would require it to re-submit its investment application for review.

The memory business in recent years has seen rapid consolidation. In May, Hewlett-Packard Co sold a controlling 51% stake in its China-based data-networking business to Tsinghua Unigroup for at least US$2.3bil (RM8.75bil), forming a partnership designed to create a Chinese technology powerhouse.

Last year Intel acquired a stake in two mobile chipmakers through another deal with Tsinghua Unigroup, which owns the companies.

A Micron deal could also face scrutiny from China's National Development and Reform Commission, which must approve outbound investments worth more than US$2bil (RM7.6bil) or those in sensitive industries.

Billionaire hedge fund manager David Einhorn said in an investor letter that Micron would be worth more than Netflix Inc within the next few years. Netflix was worth US$42.9bil (RM163.1bil) at Monday's close.  — Reuters

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