Tsinghua Unigroup, a Chinese high-tech conglomerate, on Friday confirmed that it had received a notification from a Beijing court informing it that one of its creditors demanded insolvency protection of the indebted company. As of mid-2020, Tsinghua Unigroup owed approximately $31 billion and had $8 billion in cash and cash equivalents, according to Reuters.
Tsinghua Unigroup is the owner of numerous Chinese semiconductor companies, including YMTC, the country's only 3D NAND maker, and Unisoc, a mobile SoC designer. The move comes after reports that YMTC would delay its 128-layer NAND production, but industry watchers think the bankruptcy is unlikely to disrupt operations of these assets.
Over $30 Billion in Debt
Tsinghua Unigroup is owned by two major investors: Tsinghua Holdings, a wholly-owned subsidiary of the state-owned Tsinghua University, and Beijing Jiankun Investment Group, a private investment group founded by Zhao Weiguo, who happens to be the chairman of Tsinghua Unigroup. In recent years, Tsinghua Unigroup made several high-profile acquisitions funded by the government and bonds sold to various creditors, including the Hong Kong-listed state-owned Huishang Bank.
This bank has requested the First Intermediate People's Court of Beijing Municipality to start insolvency procedures for the conglomerate since the latter had missed numerous bond payment deadlines since November, reports Nikkei Asia. As of mid-2020, Tsinghua Unigroup owed approximately $31 billion and had $8 billion in cash and cash equivalents, according to Reuters. As of mid-2020, Tsinghua Unigroup owed approximately $31 billion and had $8 billion in cash and cash equivalents. By the end of 2020, the company had defaulted or cross-defaulted on seven bonds worth $3.6 billion, the news agency says. Tsinghua Unigroup said it would cooperate with the court.
"[We] will fully cooperate with the court to conduct a judicial review in accordance with the law, actively promote debt risk mitigation and support the court in safeguarding the lawful rights and interests of creditors," the statement by the company reads.
An Instrumental Company
Tsinghua Unigroup is instrumental for the Chinese 'Made in China 2025' initiative to build a self-sufficient semiconductor industry. The company controls some of the most successful Chinese semiconductor and high-tech companies that it has acquired over the years.
Among these companies is Yangtze Memory Technologies Co. (YMTC) that owns a fab that can produce both 3D NAND memory and logic. YMTC can successfully compete with the world's leading 3D NAND suppliers in terms of density and performance, courtesy of its Xtacking technology. Yet, its production volume is fairly low compared to giants like Samsung. YMTC recently had to delay mass production of its 128-layer 3D QLC NAND 1.33 Tb memory devices.
Another jewel in Tsinghua Unigroup's crown is Unisoc, a large developer of mobile phone SoCs that has consolidated Spreadtrum and RDA Microelectronics (for about $2.7 billion) and now controls a large portion of the Chinese smartphone SoC market, competing rather successfully against such companies as MediaTek and Qualcomm. Back in 2014, Intel invested up to $1.5 billion in Unisoc for a 20% stake.
Yet another notable company in Tsinghua Unigroup's portfolio is Unisplendour, a major IT hardware, software, and services provider that carries a wide range of servers and resells Western Digital's storage systems in China. As demand for servers is on the rise, Unisplendour posted a 30% year-over-year revenue increase in Q1 2021.
Bankruptcy? Not A Problem!
Over the years, Tsinghua Unigroup has attempted to make really big overseas acquisitions to gain technologies and receive international recognition. It tried to buy Micron Technology for $23 billion and a 15% stake in Western Digital for $3.78 billion in 2015. Both deals were essentially blocked by the Committee on Foreign Investment in the U.S. (CFIUS).
Given how important Tsinghua Unigroup is for the Chinese government and its quite competitive portfolio of companies, it is unlikely that the insolvency will lead to any disruptions of their operations.
"Semiconductors are a priority for China's government," a source told Nikkei Asia. "Tsinghua Group itself may undergo a court-led restructuring, but any effect on how group companies are run would be limited."