Chinese Courtship
The Tsinghua Unigroup of China is trying to acquire a number of global semiconductor firms, including Korean ones, in order to establish joint ventures in China.
For example, the Tsinghua Unigroup made a proposition to SK Hynix last month. At that time, the former was planning to acquire 15 to 20 percent of the latter’s shares and set up a NAND flash factory with the latter in China. SK Hynix turned down the request. According to industry sources, the Chinese company sent a similar written proposal to Samsung Electronics, but Samsung Electronics also refused to accept it.
These days, the Tsinghua Unigroup is moving ahead with various M&A deals in the global semiconductor market with the government’s backing. However, Korean companies are still enjoying a comparative advantage in the memory semiconductor market based on their advanced techniques, which are considered to be at least a year ahead of those of American and Taiwanese companies, not to mention Chinese. This is why China is trying to narrow the technological gap by means of M&As and business partnerships as it did in some other sectors such as automobiles, petrochemicals and displays.
“It seems that the Tsinghua Unigroup proposed significant incentives along with its propositions to the Korean manufacturers, but a collaboration with China in the semiconductor industry, which is the largest export industry in Korea accounting for more than 50 percent of its total trade balance, is no easy decision by any means,” said an industry insider, adding, “In addition, Samsung Electronics and SK Hynix have little room for additional investment in China, in that they are already running production facilities in Xi’an and Wuxi.” He continued to say, “Still, it may be difficult for Korean firms to turn down such requests over and over, because the Chinese market is a huge one representing more than 30 percent of the global semiconductor demand, and the Chinese government can put pressure on them down the road.”