Stay ahead in innovationChina’s Tsinghua Unigroup has made a public bid to acquire the world’s second-largest memory chipmaker Micron, reportedly offering $21 per share, or $23 billion total. The chip design company was established by Tsinghua University in 1988 - and because a state university is its largest shareholder, the company is technically a state enterprise. The offer makes this China’s biggest bid; it’s more than tripling the $7.1 billion put up by Shuanghui International Holdings for Smithfield Foods in 2013.
But industry experts are putting the likelihood of the deal coming through as “next to zero.” Its management and shareholders are likely to agree: Tsinghua’s offer of $21 per share has just a 19.3 percent premium over current stock prices. And the U.S. government likely won’t approve a foreign takeover of Micron.
German memory chipmaker Infineon Technologies suffered losses for many years but chose to dissolve instead of selling overseas to keep core memory technology in the country. Local semiconductor giants Samsung Electronics and Hynix are also skeptical of the deal going through.
But if it does, the repercussions could be huge, particularly for the local economy considering the significance of the industry. Samsung and Hynix, which respectively rank as the world’s first and third top memory technology makers, supply over 70 percent of global dynamic random-access memory (DRAM) supplies. Memory chip shipments reached $33.98 billion last year, accounting for 5.9 percent of total exports. Even as overall exports fell in the first half, semiconductor exports grew more than 5 percent and helped sustain the surplus in the country’s trade account. The industry came to symbolize the country’s technological competitiveness.
But the country’s last resort is being challenged by China, which has invested heavily in semiconductors since last year. As memory chips have become more indispensable, it has been engaged in research and development (R&D) and acquisitions for the last 10 years, though it hasn’t perfected the technology. China also launched a national policy to promote the chip design and manufacturing industry and will invest $160.9 billion over the next decade. The bid for Micron is part of that drive.
Korea has already been outpaced in liquid crystal displays, and carmakers, too, are also under pressure from Chinese manufacturers. As seen by Micron, no industry is safe. Local companies must strive harder to stay ahead in the innovation game. Domestic authorities must also make sure Korea’s core technology isn’t leaked.
JoongAng Ilbo, July 16, Page 34