Wednesday, July 15, 2015

Tsinghua Unigroup Offers to Buy Micron Technologies.

On Monday night, Tsinghua University's investment arm, Tsinghua Unigroup Ltd., made a $21 billion bid for Micron Technology Inc., the world's fifth largest chip maker.  If the deal goes through, it would be the largest outward investment on record, surpassing Cnooc Ltd.'s purchase in 2012 of Nexen Energy for $17.4 billion.

Personal computer sales are down considerably over the past year, and Micron technology has been made considerably cheaper because of it.  Its stock price ended December 31, 2014 at $35.01, but ended June 2015 down 46.1% to $18.84.  Tsinghua Unigroup offered $21 per share.

The deal seems to be driven by Beijing's industrial policy, as opposed to commercial considerations.  According to Bloomberg:
If completed, a deal by state-owned Tsinghua Unigroup would be the largest overseas takeover by a China-based company and comes as the nation that accounts for more than half of global semiconductor sales seeks to wean itself from technology developed overseas. The government has budgeted as much as 1 trillion yuan ($161 billion) for spending on the chip industry over the next five to 10 years, consulting firm McKinsey & Co. estimates.
It's unclear what Tsinghua Unigroup would bring to the table.  It has limited technology or management expertise to bring to the table.  China's technology sector is suffering the same pressures as the rest of the world, so One Billion Customers is not as attractive as it otherwise would be. If U.S. regulators allow the deal to go through, market share seems likely to transition towards Samsung Electronics Co. and SK Hynix Inc.