China's Top Chipmaker Secures $22B to Expand Globally

(Bloomberg) -- Tsinghua Unigroup Ltd. has clinched as much as 150 billion yuan ($22 billion) of financing from two Chinese government-backed investors, amassing a pool of funds to pursue acquisitions and build a world-class semiconductor industry.

The state-linked chip-maker will receive a total of 100 billion yuan from China Development Bank, a policy lender overseen by the country’s cabinet, in the years till 2020. It’ll get another 50 billion yuan from a national chip fund set up in 2014 to drive advances in domestic semiconductors, Unigroup said in a statement on its website.

The company didn’t describe how the capital will be deployed. But Unigroup has been an aggressive acquirer and capacity-builder, the standard-bearer for an effort to wean China off its reliance on foreign technology. It’s building a $30 billion memory chip production complex in the eastern city of Nanjing that will become China’s largest when completed, and it’s preparing to expand memory and storage facilities in Wuhan.

The capital “is poised to lend strong support to Unigroup’s rapid expansion in the industry” and “speed the process of technology upgrades and lift our core competitiveness,” Unigroup said in a statement after signing agreements with the two investors. It didn’t say whether the financing will be in the form of credit or an equity investment.

China is spending an estimated $150 billion over 10 years to try and achieve a leading position in semiconductor design and manufacturing, an ambitious plan that U.S. executives and officials have warned could harm American interests. Unigroup, an affiliate of the business arm of elite Tsinghua University, has become the largest semiconductor player in a country dependent on imports for components such as high-performance processors and 3D-NAND memory chips.

Unigroup and other Tsinghua affiliates have pulled off a number of acquisitions over the years, including of RDA Microelectronics Inc. and Spreadtrum Communications Inc., to beef up their design capability, and signed partnership deals with global players including Western Digital Corp. But that M&A spree has hit a wall of late: Tsinghua was forced to withdraw a planned investment in Western Digital after the deal threatened to invite U.S. government scrutiny, while a Taiwanese acquisition attempt fell through.

The company’s major business units and affiliates include integrated-circuit developer Unigroup Guoxin Co., formed via a series of mergers of state-backed entities. And its $2.8-billion Changjiang Storage was the result of a merger between Unigroup’s own memory chip operations and a government-run factory in 2016.