‘Insolvent’ Tsinghua Unigroup Aims to Restructure

Article By : Alan Patterson

Tsinghua is hoping to fend off creditors by restructuring. The company's debt situation is bad news for China's semiconductor ambitions.

With debts exceeding its assets, Tsinghua Unigroup has acknowledged it is insolvent. The Chinese holding company, which owns chipmakers such as Yangtze Memory Technologies Co. (YMTC) and chip designer Unisoc (Shanghai) Technologies Co., said it will attempt a restructuring.

“Creditors said that our Group cannot pay off due debts, and assets are insufficient to pay off the debts,” Tsinghua Unigroup said in a statement on its website. “The Group has obviously become insolvent.”

Tsinghua said it has applied to the Beijing No. 1 Intermediate People’s Court for reorganization. The holding company said it will cooperate with the court to conduct judicial review, promote debt risk mitigation work, and support the court to protect the legal rights and interests of creditors in accordance with Chinese law.

As of June 2020, Tsinghua had $31 billion in debt and $8 billion in liquid assets, according to Reuters. By the end of 2020, the company had defaulted or cross-defaulted on onshore and offshore bonds worth about $3.6 billion, the Reuters report said.

Tsinghua Unigroup has been one of the most prominent investors financing the buildup of China’s semiconductor industry in recent years. In 2015, Tsinghua made a $23 billion bid to take over US memory chipmaker Micron Technology that was later thwarted amid a growing China-US trade war. Tsinghua Unigroup is 51% owned by China’s Tsinghua University and headed by former real estate tycoon Zhao Weiguo.

The insolvency follows a similar financial collapse at Chinese chipmaker Wuhan Hongxin Semiconductor Manufacturing Co. (HSMC) in November 2020. HSMC was chartered as a chip foundry with the aim to rival Taiwan Semiconductor Manufacturing Co. (TSMC).

The municipal government of Wuhan, the center of the coronavirus pandemic, has taken over the company. HSMC is under the control of the state assets supervision and administration commission for the Dongxihu district government in Wuhan. HSMC was a victim of the coronavirus outbreak and cash flow shortages.

The administration of former US President Donald Trump blunted the progress of China’s chip industry on fears that China, the main strategic competitor of the US, will gain an advantage in key areas like 5G and AI. The United States in 2020 restricted technology exports to Shanghai’s Semiconductor Manufacturing International Corp. (SMIC) after concluding there is an unacceptable risk that equipment supplied to it could be used for military purposes. The US has restricted exports of EDA tools and chip-making equipment to China, limiting the expansion of SMIC and HSMC.

Chips are vital for China’s economy. China has the world’s largest semiconductor market, yet supplies less than 20% of its domestic demand for chips. The nation has been importing more than $300 billion worth of semiconductors annually, exceeding the amount it pays for oil imports.

Tsinghua Unigroup didn’t provide details on its restructuring plan.

In November 2020, the former acting chairman of Tsinghua-owned YMTC said the company is poised to lead Samsung and Micron with NAND flash technology that it would very likely license to rivals.

Another Tsinghua Unigroup holding, Unisoc, designs chips for 5G, Wi-Fi, Bluetooth, TV and satellite communications.

This article was originally published on EE Times.

Alan Patterson has worked as an electronics journalist in Asia for most of his career. In addition to EE Times, he has been a reporter and an editor for Bloomberg News and Dow Jones Newswires. He has lived for more than 30 years in Hong Kong and Taipei and has covered tech companies in the greater China region during that time.

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