The announcement comes several weeks after Western Digital, U.S HDD or hard disk drive maker had signed a deal to acquire SanDisk Corp. one of the world’s largest memory cards and SSDs, or solid state drive makers for US$19 billion.
It also followed the group’s botched attempt to acquire world’s 2nd largest memory chip maker Micron Technology for US$23 billion.
Tsinghua Uniqroup is the vast majority share holder in the Western Digital. All combined, the data storage device makers can provide a huge breeding ground for the Unigroups’s memory chip business, as they will consume tons of NAND flash memory chips to build SSDs and memory cards like USB drives.
Massive breeding ground
Tsinghua Unigroup will invest about 60 billion yuan, or US$9.42 to build a cluster of memory chip fabrication facilities, while earmarking 16.2 billion yuan, or US$2.54 for its merge & acquisition budget to acquire memory chip making technologies or related companies. The remaining 3.8 billion yuan, or US$596.6 million will be invested to buy out a 25% share in Powertech Technology, a Taiwanese chip assembly and packaging company.
The Unigroup’s investments in the memory chip market is the latest of Chinese hi-tech entities’ spending sprees to invest in the notoriously volatile commodity chip market, following on the heel of Chinese LCD Display maker BOE Group’s announcement in April 2015 to invest to build the mammoth memory chip making facilities.
The Chinese entry into the memory chip market comes as a biggest threat ever to Korea’s long-held supremacy in the market, as its unrivalled pool of financial resources would help it to outstrip Korea in the scale and speed of the capital spending.
It would also promise to stir ferments in the competitive landscape of the memory chip industry, rekindling the life-or-death capital spending war that Taiwan, Japan, and Korea had been battling to seize the control of the memory chip market back in the 1990s.
Huge pool of financial resources
Scale is what most matters in the competition for the most capital-intensive memory chip industry, as it could help undercut rivals on costs.
More menacing is China's massive stretch of industrial and consumer manufacturing ecosystems from PCs to automobiles.
True enough, China is the world’s largest semiconductor chip market consuming tons of CPUs, mobile SoCs, memory chips, and other analog mixed signal chip solutions to supply its manufacturing prowess.
For example, Lenovo is the world’s largest PC maker, while Chinese low-cost smart phone makers like Xiomi and Huawei are fueling demand for mobile DRAM and NAND flash memory chips. The country is also the world’s largest and fastest-growing automobile market.
All combined, these manufacturing infrastructure will feed huge demand for the country’s memory chip makers, helping them to reach economies of scales earlier than expected.