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U.S. memory maker buyout by Chinese firm not likely to succeed

Lucas Mearian | July 16, 2015
A reported buyout attempt by China's largest computer chip maker of U.S. based Micron Technology isn't likely to succeed, according to industry analysts.

Acquiring Micron would give Tsinghua Unigroup a major stake in the DRAM and NAND marketplace.

Micron "has a strong position in both NAND flash and DRAM sales, and has shown itself to be quite resilient during repeated market downturns that have cut DRAM supplier ranks from 28 companies in the middle-1990s to only 3 today," Handy added.

Micron is the world's second largest DRAM producer behind SK Hynix, and is the third largest NAND memory maker in a market led by Toshiba/SanDisk and Samsung, according to IHS.

Micron is also ranked third in terms of DRAM revenue (sales), behind Samsung and SK Hynix and third in terms of NAND flash revenue behind Samsung and Toshiba (SK Hynix comes in fourth).

A buyout of Micron would give China instant "self-sufficiency" in DRAM and NAND semiconductor production, IHS's Zhang said, a market the country has yet to break into with any significance.

Zhang added, however, said any such deal would not be easy and would require a long haul in convincing the U.S. government to okay it based on "security concerns."

Handy agreed.

"This kind of deal often must pass a lot of government scrutiny before it closes, and that could take several months," he said. "An exhaustive U.S. government review is very likely in this case."

What is Tsinghua Unigroup?

Tsinghua Unigroup is China's leader in fabless semiconductor manufacturing.

Handy referred to Tsinghua Unigroup as a "relatively puzzling company" that is managed by Tsinghua University in China. The university has posted a sparse outline of its work on the web.

"Unigroup itself has a Chinese-only website, which does have an "English" button that appears not to work," Handy wrote.

A subsidiary of Tsinghua Holdings Co., Ltd., Tsinghua Unigroup is also funded by Tsinghua University. Last year, the chipmaker penned a series of development agreements with Intel Corp., which has also had a development partnership with Micron for more than seven years.

In its deal with Tsinghua, Intel agreed to invest about $1.5 billion for a minority stake of approximately 20 percent of the holding company under Tsinghua Unigroup, which will own Spreadtrum Communications and RDA Microelectronics. Both Spreadtrum and RDA are leading fabless semiconductor companies in China. The Intel/Tsinghua agreement is still on hold pending U.S. government approval.

At the time of the agreement, Intel CEO Brian Krzanich pointed to China as a huge market for smartphones and as having the largest number of Internet users in the world.

"These agreements with Tsinghua Unigroup underscore Intel's 29-year-long history of investing in and working in China," Krzanich stated. "This partnership will also enhance our ability to support a wider range of mobile customers in China and the rest of the world by more quickly delivering a broader portfolio of Intel architecture and communications technology solutions."

 

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