A fallen semiconductor star looks to SOEs and Alibaba for help

Business & Technology

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Another day, another Chinese company falling victim to rampant debt. This time, it’s semiconductor company Tsinghua Unigroup:

  • In an echo of the Evergrande saga, Unigroup’s growth was fueled by risky spending, including rebuffed, billion-dollar bids for U.S. chipmaker Micron Technology and Taiwan’s champion TSMC.
  • By the end, online gambling and Indian-made phones formed its eclectic portfolio. Starting in 2020, it defaulted on several bonds worth billions of yuan, then came bankruptcy.

The context: Unigroup was once a centerpiece of China’s quest for semiconductor dominance, especially after top firm SMIC’s supply chains were choked off by the U.S. A 2019 study found it received more government funding than any chipmaker in the world.

  • Unigroup wants a bailout from one or more white knights to reclaim its former glory. Alibaba made the seven-company shortlist, but it’s the only one that’s not state-owned.
  • It’s unclear how the company will choose its savior, but state-owned enterprises may have a leg up; they’re more likely to be aligned with the government’s chip goals.

However: Unigroup may want to choose a tried-and-true tech titan like Alibaba, whose capitalistic motivations and related chipmaking projects could give it a better shot at success.