According to a report from Nikkei, debt-stricken Tsinghua Unigroup will scrap plans to build two new large 3D NAND and DRAM fabs and reshuffle Unisoc as part of its restructuring plan. Both moves represent major setbacks for China's 'Made in China 2025' semiconductor self-reliance plan.

Tsinghua Unigroup will axe two major semiconductor fab projects in China as part of the ongoing restructuring procedures, a serious blow for the country's semiconductor self-sufficiency goal as local memory production is a key part of the plan. The move will impact the global supply of 3D NAND and DRAM and thus affect memory prices two or three years from now. In addition, Tsinghua will reorganize Unisoc, the country's largest developer of a mobile system-on-chips (SoCs), which might be good news for MediaTek and Qualcomm but another blow for the self-sufficiency plan.

New Fabs Scrapped

Tsinghua Unigroup already owns Yangtze Memory Technologies Co. (YMTC), a rapidly developing yet still fairly small 3D NAND producer. The company announced intentions to build a 3D NAND and a DRAM fab worth $30 billion in 2017. Still, the initiative has been reconsidered several times (the locations of the fabs were changed, the amount of money to be invested was projected to increased) and has never materialized. After Tsinghua Unigroup faced major financial difficulties last year, the destiny of both projects was completely uncertain, especially amid tensions between China and the U.S.

Tsinghua Unigroup's second 3D NAND project was essentially meant to replicate YMTC's success. Yet, since YMTC is yet to become a rival for Samsung Semiconductor and SK Hynix — two South Korean companies that produce 3D NAND in China — it did not really make much sense to build yet another fab, which could cost as much as $24 billion, reports Nikkei.

To build its DRAM operation, Tsinghua hired Yukio Sakamoto, a former chief executive of Elpida Memory who has experience competing against companies like Samsung and Micron. However, Mr. Sakamoto left Tsinghua in the second half of last year after the company faced bankruptcy, even before he could use his knowledge and connections. Since it would have taken years and cost billions of dollars to develop a competitive DRAM process technology amid uncertainties with the supply of fab tools in 2025 ~ 2026, Tsinghua reportedly axed its DRAM intentions, too.

Unisoc to Be Restructured

Unisoc, a smartphone and tablet SoC developer, is yet another Tsinghua Unigroup business unit to be restructured. The company, which consolidates assets of consolidated Spreadtrum and RDA Microelectronics, reportedly controls about 9% of application processors for mobile devices globally. Still, since it mostly sells inexpensive 4G devices, it barely brings in huge profits and cannot compete against SoC designers with 5G-supporting products.

The current plan includes further consolidation and relocation of existing engineers from multiple sites across China. While this might increase efficiency due to better collaboration, it will also postpone the realization of ongoing projects, possibly including the development of 5G SoCs.

New Strategic Investors

With many assets under its control and huge plans for expansion, Tsinghua Unigroup owed approximately $31 billion and had $8 billion in cash and cash equivalents as of mid-2020. Yet it had defaulted or cross-defaulted on seven bonds worth $3.6 billion by the end of 2020, according to Reuters. As a result, Hong Kong-listed state-owned Huishang Bank requested the First Intermediate People's Court of Beijing Municipality to start insolvency procedures for the conglomerate in 2021.

Late last year, two new investors — Beijing Jianguang Asset Management Co. and Wise Road Capital — emerged as new backers of Tsinghua Unigroup. Nikkei believes that the two funds acquired a portion of the stake controlled by Beijing Jiankun Investment Group, a private investment group founded by Zhao Weiguo, the chairman of Tsinghua Unigroup.

Both Beijing Jianguang Asset Management Co. (also known as JAC Capital) and Wise Road Capital are keen high-tech investors. Over the past several years, they acquired several semiconductor companies, including chipmaker Nexperia, once a subsidiary of NXP Semiconductor, and Chinese chip packaging facilities of ASE Technology Holding. Last year they attempted to buy Magnachip Semiconductor but were denied by the U.S. and South Korean governments.

With new investors on board, Tsinghua Unigroup will be more financially stable than before, but scrapping two major semiconductor projects emphasizes that the goals of the 'Made in China 2025' project are not going to be achieved.

By: DocMemory
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