Q: Tsinghua Unigroup has expressed recently its strong ambition for investment in the memory industry. Why?

A: We aim to make a major breakthrough in the development of NAND flash technology, and for the DRAM industry, we will choose one of the major players for cooperation. We are still in a negotiation stage and the cooperation could be in the form of joint venture, technology licensing, or others.

In terms of technology, Asia makers are strong in manufacturing chips, but the design and innovation capability in the US is beyond competition. As a result, we have committed equity investment in Western Digital (WD), which has also reached a deal to acquire SanDisk. Including the investments in Taiwan-based Powertech Technology (PTI), these deployments are to cope with future demand for flash memory storage devices in China.

Basically, Tsinghua Unigroup will target publicly listed technology companies worldwide for mergers or acquisitions as shareholders of these firms will do research for us, and an excellent company should be backed up by an excellent management team. Thus, we only need to make judgment if the businesses of targeted companies are compatible with us and if they have potential for future development.

Q: Prior to your recent visit to Taiwan, you seemed to have urged the China government to adopt a harsh stand against the Taiwan government for not opening its IC design industry to China capital. Why?

A: I must clarify that my comments, delivered at a technology forum held in Beijing, were not meant to press the Taiwan government. What I was saying is that the China government should prohibit the sales of Taiwan-made chips and related products in China if Taiwan is not treating China-based companies equally in accordance with business principle as we treat Taiwan's firms in China.

The Taiwan government can restrict the inflows of capital that involves national defense and military issues, but the restrictions should not be unconditional.

I also do not see the liberalization will do any harm to Taiwan because the more money Taiwan has the more opportunity it can grab, and also more talent it can retain. As Taiwan does not welcome China capital, we have no choice but to raid talent from Taiwan.

Q: So you are suggesting that the Taiwan government should open its door broadly to China capital?

A: Yes, I have noticed that direct foreign investments in Taiwan are scarce, which is totally in opposite to what we have in China. The attitude and policy of the China government both show high levels of economic awareness. You can impose restrictions due to defense and military considerations, and Taiwan can also apply policies similar to those of the US to examine the possible impact of an investment project to its national security.

I will reiterate that Spreadtrum Communications and RDA Microelectronics under the Tsinghua Unigroup will be willing to merge with MediaTek if the Taiwan government can ease its restrictions.

Q: Would it be acceptable for you if Taiwan opens its door to China capital conditionally and setting investment ceilings, limiting the ratio of directors and supervisors as well as voting rights?

A: I can accept some restrictions, particularly regarding the prevention of outflows of key technologies and the exodus of talent, but as I have already mentioned that the most important thing is to abide by the principle of equality. Limiting the member of directors or supervisors or voting rights violates the principle.

The board of directors is not involved in technology development, and the directors are simply representing the capital which is participating in a company and should protect their equity investments. So I sincerely hope that Tsinghua Unigroup's plan to acquire a 25% stake in Powertech Technology for NT$75 (US$2.3) per share can be approved in accordance with Taiwan's current regulations.

Q: Could you talk about the latest developments at Spreadtrum and RDA?

A: Actually, I do not involve heavily in these re-invested subsidiaries, which are mostly operated by professional managers. I am only responsible for making decisions since the capital required for development of a single chip under the 28nm process and beyond is extremely high, which may be difficult for the professional managers to make a decision. I will help make a decision by asking if there is an opportunity for a target chip.

Spreadtrum is currently still lagging behind MediaTek and Qualcomm in terms of technology, but has continued to expand its product portfolios and committed more investments to technology upgrades after receiving capital from Tsinghua Unigroup and the government investment fund. Its revenues surpassed the US$1 billion mark in 2013, reached US$1.2 billion in 2014 and are expected to top US$1.5 billion in 2015. In short, Spreadtrum's revenues are growing at a pace of 20% annually.

Originally we planned to merge RDA with Spreadtrum, but later decided to let RDA develop independently related chips for IoT applications as it is good at bringing down IC manufacturing costs. I helped RDA make a decision to expand the number of its R&D personnel from 400 to 1,000.

Q: Spreadtrum appears to be continuing soliciting capital from domestic and foreign investors. What is your comment on that?

A: In fact, Spreadtrum does not solicit capital from outside actively but rather accept investment funds initiated from potential investors. I met with Intel CEO Brian Krzanich in April 2014 to exchange views regarding markets and technologies in the wireless chip segment, but Krzanich made an investment offer during the course of our conversation. Intel bought our shares at a premium in September 2014 which was good to shareholders of Tsinghua Unigroup and Spreadtrum.

The national semiconductor investment fund also injected CNY5 billion into Spreadtrum at a premium, and I had no reason to reject the incoming funds.

Q: What is the investment strategy for Tsinghua Unigroup in the global technology industry?

A: Our strategic target is to develop from chips to cloud. We have invested in H3C Technologies, Western Digital and indirectly SanDisk. Coupled with Spreatrum and RDA, we aim to continue to deepen our deployments in the global semiconductor industry supply chain. We will also continue to enhance our technology in order to offer technology and R&D support in the mobile IoT era.

China-based Tsinghua Unigroup is currently riding high in the global semiconductor industry with a series of acquisitions totaling over US$10 billion in the past two years. Tsinghua Unigroup chairman Zhao Weiguo visited Taiwan recently after his company struck a deal to acquire a 25% stake in backend service company Powertech Technology (PTI) for US$598 million.

While in Taiwan, Zhao urged again the Taiwan government to relax its ban on China's investment in Taiwan's IC industry and also revealed Tsinghua Unigroup's investment strategy for building up its capacity in the global semiconductor supply chain during an interview with Digitimes.

Q: What's motivating Tsinghua Unigroup to invest in the global semiconductor industry?

A: Initially, we targeted China-based and also international semiconductor firms for investments as we were eyeing the vast business opportunity to be derived from the domestic demand for semiconductor products in China. We have now decided to take our investment policy a step further as we see that the pursuit of self-sufficiency in the semiconductor industry will become a focus of the national policy. We have more opportunities as compared to other risk venture capital firms which have been focusing on targets related to IoT devices and applications.

By: DocMemory
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