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Digitimes Research: Tsinghua Unigroup acquisition of Micron faces difficulties, but is a must for China for further development
Nobunaga Chai, DIGITIMES Research, Taipei [Wednesday 15 July 2015]

According to a Wall Street Journal report on July 14, China's Tsinghua Unigroup is planning to spend US$23 billion (or US$21 per share) to acquire US-based Micron Technology. The amount is higher than the China government's China National Semiconductor Industry Investment Fund's scale of CNY120 billion (US$19.32 billion). However, Digitimes Research believes if the acquisition plan is real, the deal will still need to pass many obstacles such as Micron's board and US government regulations and therefore, the chance for the company to complete the acquisition is rather slim.

However, if the company successfully completes the deal, while it may not immediately change the global memory market's current status, China's IC product lines will still be able to expand from the mobile communication market to the datacenter and cloud computing market, and may even create a China-based brand in the end-product market.

Since China's eleventh five-year plan (2006-2010), the government has treated memory as a core objective for the development of its semiconductor industry and planned to have Semiconductor Manufacturing International (SMIC) and XMC to focus on NAND flash R&D and manufacturing and XMC to also work on next-generation RRAM and MRAM development, Digitimes Research explained.

However, lacking memory-related silicon intellectual property (SIP) and patents, China's semiconductor industry's development pace is rather slow and therefore, the government established the China National Semiconductor Industry Investment Fund in the second half of 2014, looking to acquire DRAM-related technologies via acquisition of companies like Integrated Silicon Solution (ISSI).

Micron has DRAM, NOR flash and NAND flash technologies and its product lines are rather complete, similar to Samsung and SK Hynix and in 2014, the US player's DRAM and NAND flash's revenues were the third and fourth largest worldwide, respectively.

More importantly, observing the company's product lines by their applications, in addition to PC and mobile communication applications, Micron is also able to provide solutions for solid state drives (SSD), servers, car electronics, industrial applications and medical electronics, perfectly matching the direction of China's government Manufacturing 2025 plan for technology development.

In fact, Micron's revenues from China and the related proportion of the company's overall revenues have been rising rapidly. In 2012, Micron's revenues from China were only US$2.94 billion, accounting for 35.7% of overall amount, but in 2014, the number from China grew strongly to US$6.72 billion and accounted for 41.1% of Micron's total revenues.

If Tsinghua Unigroup is able to acquire Micron, the deal will help raise China's in-house production rate in the domestic IC market. In 2014, China's domestic IC market had a scale of US$98 billion and the acquisition will be able to raise the in-house production rate by 6.9% (Micron's revenues from China).

Tsinghua Unigroup also acquired a 51% stake in H3C, a network equipment, server and storage subsidiary of Hewlett-Packard's (HP), in May 2014 and has also been looking to acquire Marvell to gain storage chip solution technology. Via these aggressively acquisitions, China is hoping to establish China-based brand vendors that are able to provide one-stop solutions and the targeting markets will also gradually switch from domestic demand to foreign countries.

If Tsinghua Unigroup failed to acquire Micron, the company may try to form a partnership with Micron similar to that between Micron and Inotera Memories, but whether such a development will occur, still requires more observation.

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