China’s largest computer chip manufacturer doesn’t lack for ambition. Late last year, the state-owned Tsinghua Unigroup announced it would invest $47 billion during the next five years to become the world’s third-largest producer of NAND memory chips, which inhabit everything from flash drives to digital cameras to personal computers. That’s almost as much as market leader Intel’s annual revenue, which was $50 billion in 2014.
“If you can’t be the top-three giant, it will be very hard to develop your business in the chip industry,” Zhao Weiguo, the company’s chairman, told Reuters.
“If you can’t be the top-three giant, it will be very hard to develop your business in the chip industry.”
—Zhao Weiguo, Chairman,Tsinghua Unigroup
Qualcomm Inc. is currently the third-largest chip manufacturer in the world, trailing Samsung Electronics and Intel. Tsinghua’s aggressive expansion plan continues a campaign begun in 2013 to reduce China’s dependency on Western chip manufacturers. (Both Qualcomm and Intel are based in California; Samsung is headquartered in Seoul, South Korea.) Since then the Beijing-based company has spent more than $9.4 billion in acquisitions and investments, including the acquisition of Spreadtrum Communications and RDA Microelectronics in 2013 and 2014, respectively, and buying a $600 million stake in Taiwan’s Powertech Technology Inc. in 2015.
But the execution of Tsinghua’s strategic transformation, which supports China’s national security goal of strengthening its semiconductor industry, hasn’t been flawless. The company’s $23 billion bid last year to acquire the only remaining U.S. chip manufacturer, Micron Technology, fell apart due to the low likelihood of regulatory approval. Still, Zhao remains determined to establish Tsinghua as a top-three player in the global chip industry. Click To Tweet
“The next five years is key,” Zhao said. “There is an enormous market out there.”