Chinese chip giant considers IPO, sells land to cut debt burden

BEIJING – The new owners of Tsinghua Unigroup are looking for ways to stave off creditors after completing a US$9 billion (S$11.9 billion) takeover. This includes the sale of industrial real estate and fast-growing business units such as Qualcomm’s local rivals.

Unigroup executives have discussed initial public offerings (IPOs) of three of its subsidiaries, including Unisoc, according to people familiar with the matter. This could lead to one of the more prominent debuts in China’s semiconductor industry, which is short on advanced homegrown chips.

Unigroup, which until recently partnered with a prestigious university associated with Mr. Xi Jinping and once spearheaded China’s efforts to build a world-class semiconductor sector, is building a giant Yangtze River memory technology in the country. It’s been struggling after years of huge spending, including . In 2022, Unigroup endured a controversial restructuring, opposed by former chairman Zhao Weiguo. JAC Capital led a consortium to buy the distressed company and sell off Yangtze, China’s largest manufacturer of memory chips for servers, PCs and mobile devices.

Discussions are in the early stages and there is no guarantee that Unigroup will eventually proceed with open market floats. But the company will need to raise cash to bring its debt-to-equity ratio below its target of 50% within two years, the person said. Management has not ruled out a final overseas listing, although it is still in the preliminary stages, the person added. Unigroup may also decide to squeeze more profits from its insurance companies, after-school tutoring services and real estate companies, the people said.

Unigroup is at a crossroads, as is China’s broader semiconductor sector facing escalating US technology export sanctions.

The company and its new owner, which spun off what was once the pinnacle of its business, Yangtze Memory, have not disclosed any long-term plans to reclaim their place in the chip industry. A division of Taiwan’s Foxconn Technology Group (the world’s largest iPhone assembler) acquired a small stake, but was forced to sell it by the Taiwanese government over national security concerns.

Adding to the uncertainty, Zhao said last year, Extensive investigation into corruption in China’s chip industry and the fund that spearheads many of the government’s most high-profile investments in players. By that point, China’s top leadership was becoming increasingly frustrated with years of failure to develop semiconductors that could replace US circuits.

For years, China was the world’s largest spender on tipping incentives, with a scale unmatched from Washington to Tokyo. Efforts to combat Covid-19 and deal with the threat of a global recession are now draining the country’s financial resources and forcing Beijing to rethink its controversial approach. Policy makers are looking for other ways to support domestic semiconductor companies.

Turning Unigroup around would go a long way toward restoring confidence in the local company’s ability to thrive in chip manufacturing.

In 2022, Unigroup’s new chairman, Li Bin, said the company would eventually expand beyond chips into areas such as genetics and artificial intelligence.bloomberg