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Chinese conglomerate Tsinghua Unigroup boosts state support

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Tsinghua Unigroup Co., the heavily leveraged Chinese chip conglomerate, said a consortium led by two state-backed semiconductor venture capitalists will become its strategic investor.

The deal is the latest step in Unigroup’s efforts to restructure its assets after a creditor filed for bankruptcy in July. Unigroup, once hailed as China’s semiconductor champion, has built its business empire over the past decade through a series of acquisitions, but has defaulted on billions of dollars in bonds in the past year .

The consortium is led by Beijing Jianguang Asset Management Co., known as JAC Capital, and Wise Road Capital, Unigroup said in a statement Friday. He did not disclose the size of the case.

Unigroup and the strategic investor would then decide how to restructure the chip conglomerate’s widely diverse assets, a plan that is subject to court approval.

Unigroup’s subsidiaries include China’s leading memory chip maker, Yangtze Memory Technologies Co., and mobile chip maker Unisoc, as well as cloud computing chip and smart card makers.

Unigroup’s securing of state-backed investors reinforces how eager China is to achieve semiconductor self-sufficiency, a goal that has become more urgent amid trade tensions with the United States. Some of Unigroup’s plans would help China produce more chips domestically.

JAC and Wise Road Capital have jointly made multi-billion dollar semiconductor investments in recent years, ranging from chipmakers to semiconductor equipment and materials companies.

The two companies have completed the purchase of a business unit from the Dutch semiconductor giant NXP Semiconductors NV.

for $ 2.75 billion in 2017, a huge cross-border semiconductor deal for China at the time. This month, Wise Road Capital agreed to buy four factories in China from Taiwanese company ASE Technology Holding. Co.

, one of the world’s largest chip assembly and testing companies.

The consortium backing Unigroup was chosen for its strong track record of investing in the chip business, which should help convince creditors to offer financial support to Unigroup, according to people familiar with the matter.

They beat another bidder, led by e-commerce giant Alibaba Group Holding Ltd.

and funds backed by local government, the people said. In recent years, Alibaba has increased its investments in cloud computing and internal chip design operations.

A spokesperson for Unigroup said he had no comment beyond the company’s statement. JAC and Wise Road could not be reached on Friday evening and Alibaba did not respond to a request for comment.

Unigroup’s financial struggles were striking for a company that made headlines in 2015 with an unsuccessful $ 23 billion bid for U.S. memory chip maker Micron Technology Inc.

Originally an obscure state-backed company selling technology services and natural gas, Unigroup has, over the past decade, made rampant expansions in semiconductor projects. He announced plans to build several chip factories, many of which have since been delayed.

To fund its projects, Unigroup has relied heavily on government support, including investments from China’s National Semiconductor Fund. From 2014 to 2018, government support exceeded 30% of Unigroup’s consolidated annual revenue, according to the Organization for Economic Co-operation and Development, a high level compared to other international chipmakers.

As of April, the company and its subsidiaries defaulted on at least $ 2.8 billion in domestic and offshore bonds, according to a company filing.

In July, one of Unigroup’s creditors asked a court to open bankruptcy and restructuring proceedings on the grounds that it had failed to repay its debts.

Write to Yang Jie at [email protected]

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Appeared in the print edition of Dec.11, 2021 under the title “Chinese Chip Conglomerate Gains State-Backed Investors”.