Tsinghua Unigroup has been expanding its reach with foreign investments including a recent $23bn takeover bid for American firm Micron Technology

China investing �31bn in microchip manufacture

Tsinghua Unigroup, China's state-owned technology company, is planning to invest 300bn yuan (£31bn) over the next five years in a bid to become the world's third-biggest chipmaker.

The investment was announced by the chairman of the company, Zhao Weiguo, who said Tsinghua is in talks with a US-based company involved in the chip industry.

Zhao said that a deal could be finalised by the end of this month, although he declined to offer any further details.

"If you can't be the top-three giant, it will be very hard to develop your business in the chip industry," Zhao said, citing reports that China spends more on chip imports each year than it does on crude oil.

"The next five years is key... There is an enormous market out there," he added.

The company is controlled by Tsinghua University, which counts Chinese President Xi Jinping among its alumni. According to Zhao, it is in currently talks with a "world-class memory chip giant" to build a new chip factory in China.

The current third-place microchip manufacturer is the California-based Qualcomm, behind Samsung and market leader Intel, which has a market capitalisation of $151.5bn.

The sheer size of Tsinghua’s planned investments is almost equal to Intel's $50bn chip revenue last year and could disrupt the NAND chip industry.

The top five chipmakers control more than 90 per cent of the global NAND chip market after years of boom-and-bust squeezed out smaller players.

Investment in the sector is seen as a priority by the Chinese government, which is keen to end the country’s reliance on foreign semiconductors as part of ambitions to build a modern, digitised armed forces capable of matching other advanced militaries.

China is also concerned about the possibility of cyber spying by foreign powers from technology built in other countries.

Over the past two years, Tsinghua Unigroup has spent more than $9.4bn in acquisitions and investments at home and abroad, including the purchase of stakes in US data-storage company Western Digital and Taiwan's Powertech Technology.

In July, the company made a $23bn takeover bid for American chipmaker Micron Technology although this was rejected amid concerns a deal might endanger national security.

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