Imperial Move

 

As the news broke that China will jump into the memory semiconductor business by taking over U.S.-based Micron Technology Inc., the fourth largest semiconductor manufacturer in the world, Samsung Electronics and SK Hynix have been put on emergency alert. The report has not been confirmed yet, but there are increasing signs that China will start the memory business. Accordingly, there is growing concerns that it could jeopardize the dominant position of Korean companies in the memory sector. 

According to foreign press reports on July 14, Chinese state-owned semiconductor chip designer Tsinghua Unigroup Ltd. offered to buy U.S. memory chipmaker Micron Technology Inc. for US$23 billion (26.2 trillion won). If the M&A is completed, the deal would be the largest Chinese takeover of a U.S. firm. Micron is currently suffering from a downturn in business due to the drop in the price of PC DRAM, its main product. Tsinghua Unigroup is a state-owned company set up by academics at the elite Tsinghua University in 1998. It has become China’s largest semiconductor company by acquiring China’s two major mobile chip producers in 2013, Spectrum Communications and RDA Microelectronics.

Industry watchers believe that Tsinghua Unigroup’s takeover of Micron is unlikely to happen. A Tsinghua Unigroup spokesman said, “The deal is still under discussion,” while a Micron spokesman said, “The company has not received a buyout offer,” and declined further comment. A low offer price is another reason. Tsinghua offered US$21 per share for Micron, which is at a 19.3 percent premium to stock close on July 13.

With the takeover offer, however, China is expected to enter the memory semiconductor market, and the market power of Samsung Electronics and SK Hynix could be on the line in the long term.

According to local industry sources, China’s leading display company BOE Technology Group is also considering whether or not to tap into the memory market this year. Hyundai Securities analyst Park Young-joo said, “I don’t think the Committee on Foreign Investment in the U.S., a panel of representatives from more than a dozen departments and agencies across the U.S. government, will allow a Chinese company to acquire Micron." However, we should keep an eye on the movement of Chinese companies to advance into the semiconductor business.” The Chinese government has already been seeking opportunities for expansion into the memory market. As the country imports memory chips worth more than US$230 billion (265 trillion won) a year, China plans to begin home production of the products without fail.

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