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Asia300

Tsinghua Unigroup postpones mobile chip unit IPO

Qualcomm rival Unigroup Spreadtrum & RDA undergoes management shakeup

Tsinghua Unigroup is China's national champion as the country aims to develop a competitive chip industry. (Photo by Cheng Ting-fang)

TAIPEI -- Beijing tech conglomerate Tsinghua Unigroup looks to delay the initial public offering for its mobile chip unit to the end of 2019, according to people familiar with the matter.

Unigroup Spreadtrum & RDA, a mobile chip provider and smaller rival of American company Qualcomm and Taiwan's MediaTek, was set to go public this year in one of the most watchable IPOs from China. The state-backed group started talks with accountants last year, the Nikkei Asian Review has reported.

"Although Tsinghua Unigroup wants to push its mobile chip division into the public market to raise more capital, a senior government official has different opinions about the timing," said a person familiar with the matter. "That's one of the key reasons that the schedule is postponed."

A listing for Unigroup Spreadtrum & RDA has been rescheduled for sometime toward the end of 2019, the person said, noting that a further postponement remains possible.

Tsinghua Unigroup's key shareholders include China's Ministry of Education and the China Integrated Circuit Industry Investment Fund, the country's most prominent financing vehicle for the chip sector. The group also serves as the most vital entity to help the country build a competitive semiconductor ecosystem and cut the heavy reliance on foreign suppliers. Another Tsinghua Unigroup subsidiary, Yangtze Memory Technology, is viewed as China's hope to eventually challenge top global NAND flash memory chipmakers such as Samsung Electronics and Toshiba.

A researcher plants a semiconductor on an interface board at a Tsinghua Unigroup research center in Beijing.   © Reuters

"At the same time, the mobile chip arm is still undergoing a major management reshuffle since the last few months of 2017," another person told the Nikkei Asian Review. "The mobile unit still battles to report profit, and that would become a concern if the division goes public."    

Tsinghua Unigroup promoted Adam Zeng, former executive vice president of ZTE, to head the mobile chip arm in November. Leo Li, chief executive of Spreadtrum Communications from 2008 to the end of last year, was given a new title as co-president of Tsinghua Unigroup. But the Chinese group said Wednesday that Li has resigned due to personal reasons and would exit the company.

About one-third of the company's senior executives, with titles of vice president, have been reassigned to different jobs and shifted to lead different teams, said a person familiar with the matter.

Tsinghua Unigroup did not respond to Nikkei Asian Review's request for comment.

Unigroup Spreadtrum & RDA controls Spreadtrum Communications and RDA Microelectronics, two key Chinese mobile chip makers that Tsinghua Unigroup took over and privatized several years ago in deals valued at $1.78 billion and $907 million, respectively.

Both companies were originally listed on Nasdaq. For 2016, Spreadtrum and RDA said they together generated revenue of more than 12.5 billion yuan ($1.98 billion at current rates). Sales figures for 2017 have not been disclosed.

Though the private company did not report earnings, a person familiar with the matter cited losses of around $300 million in 2016 and $500 million in 2017 due to a fierce price war and increasing research and development expenses.

Unigroup Spreadtrum & RDA supplies chipsets for Samsung's entry-level handsets, while other customers include many Chinese smartphone makers such as Lenovo Group and TCL as well as Indian phone brands like Lava and Micromax.

The company's global market share in providing mobile processor chips was 11% in 2017, compared with 36% for Qualcomm and 24% for MediaTek, research agency Gartner said.

The mobile chip company announced a collaboration Feb. 22 with Intel in which the U.S. chipmaker will offer its 5G modem chips in the second half of 2019. Unigroup Spreadtrum & RDA would be able to bundle Intel's 5G modem with its own application processors and provide a total solution chipset to clients.

Such a deal would give Unigroup Spreadtrum & RDA an opportunity to close gaps with its bigger rivals. It is unclear whether Unigroup Spreadtrum & RDA need to pay Intel for the 5G modem offering.

In 2014, Intel invested $1.5 billion for a roughly 20% stake in Unigroup Spreadtrum & RDA.

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