Over the next five years, the Chinese state-funded technology company Tsinghua Unigroup is planning to invest $47 billion to become the third largest chipmaker in the world. The announcement was made by Tsinghua chairman Zhao Weiguo on Monday.
Tsinghua is currently in discussions with a United States company about being involved in the microchip industry in the near future. The deal could move very quickly, possibly being completed by the end of this month. However, more details were not provided at this time.
Zhao did mention that it was unlikely that Tsinghua would purchase a majority stake in an American company, because it would be a sensitive issue for the American government.
China currently spends more money importing technological chips than it does importing crude oil. If China can develop its own chips, the country will save a tremendous amount of money. Zhao has insisted that Tsinghua will need to be one of the top three chip producers in the world if it wants to be taken seriously.
Currently, the top three chip producers in the world are Intel, Samsung and Qualcomm. Intel has a market capitalization of $151.5 billion. Last year, Intel earned $50 billion from chip revenue. If Tsinghua is successful at its goal, it would send shockwaves throughout the entire microchip industry. Currently the top five chipmakers control more than 90% of the market. Last year, the global chip market was estimated at being worth more than $355 billion.
Improving China’s chip industry has long been seen as a strategic priority of the Chinese government. The country is working hard to end its technological reliance on others, as the country is seeking to construct a digitized military that can match or exceed the strongest world powers. In the cyber-spying age of today, ending digital reliance is critical if a world power wants to be taken seriously.
Over the past two years, Tsinghua has spent nearly $10 billion in making acquisitions and investments, both in China and abroad. The company has already purchased stakes in the American data storage company Western Digital and the Taiwanese technology company Powertech.
In August, Tsinghua failed to acquire American technology giant Micron in a $23 billion takeover. The deal was rejected by the United States government because of national security concerns.
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