Parent company plans 100b yuan fund to boost presence in integrated circuit industry

Tsinghua Holdings Ltd, the parent company of China’s largest chipmaker Tsinghua Unigroup Co Ltd, said on Dec 16 it is planning to launch a more than 100 billion yuan fund ($15.45 billion) with its partners to expand its presence in the integrated circuit industry.

The move is the company’s latest attempt to build Tsinghua Unigroup into one of the top three chipmakers in the world, joining the league of giants such as Intel Corp, Qualcomm Inc and Samsung Electronics Co.

Xu Jinghong, chairman of Tsinghua Holdings, said in an exclusive interview with China Daily: “We are planning to establish an industry fund next year. By teaming up with our partners, the fund will exceed 100 billion yuan, maybe like 200 billion yuan.”

Xu declined to offer details of the company’s partners, but said the new fund will be used to invest into new chip projects and make more acquisitions to expand its presence in the integrated circuit industry.

“We will continue investing into competent chip companies. But we will not be the largest stockholder or the holding company of every acquisitions we make,” he said at the sidelines of the Second World Internet Conference, which opened on Dec 16 in Wuzhen, Zhejiang province.

Tsinghua Unigroup’s intensified efforts to boost its chip-related resources come as the government seeks to reduce the country’s reliance on foreign technology, amid worries that it may pose a risk to national security.

“Currently, money is not a problem for us. We can deploy more capital than what the public sees today. The real challenge lies in how to bring out the largest potential of companies we have acquired,” Xu said.

Tsinghua Unigroup has invested in a number of Taiwan-based chip companies and US enterprises in the hope of acquiring more talents and chip technologies. The latest investment came earlier this month when it announced a plan to spend 13.5 billion yuan ($2.1 billion) on buying stakes in two Taiwan chip packaging and testing enterprises.

Roger Sheng, a senior analyst at research firm Gartner Inc, said the latest initiative will accelerate Tsinghua Unigoup’s steps to become a leading global chipmaker.

“Due to the central government’s strong support, both public and private capital is flooding into the integrated circuit sector. So it is not difficult for Tsinghua Holdings to launch such a big fund with its partners. The new initiative will allow it to channel more resources into research and development.”

But he also warned that the State-owned enterprise has invested in too many companies in the past two years, which will make it difficult to integrate the resources it has acquired.

“No one can build a chip giant with just money. Talent and technology are the keys. But in several cases, Tsinghua Unigroup has only bought a minority stake, which is not enough to give it access to a foreign chip company’s core technology.”

“Instead of expanding its presence, I believe it will be a better idea for Tsinghua Ungroup to concentrate its resources in several units which boasts the greatest potential.”