Tsinghua puts all chips on Micron with $23bn bid

Tsinghua Unigroup, a subsidiary of the state-backed holding company for Tsinghua University, has announced plans to acquire US-based chip manufacturer Micron for $23bn.

If it goes through, the deal will be the largest acquisition of a US firm by a Chinese company in history.

Tsinghua is looking to pay $21 per share for Micron, roughly a 19% premium of the company’s share price of $17.61 prior to the potential deal being announced. Shares at the company have tumbled over the past six months owing to a slowing of demand for personal computers, which started the year trading at around $35 per share.

The deal is far from settled, and is seen as having to overcome a number of obstacles before it can go through, firstly price. Analysts at JP Morgan have said that an offer between $27 and $29 per share would be more representative of the true value of the company, while analysts at fellow investment bank Needham & Company suggested that Tsinghua should be looking to pay $35 per share, giving Micron a value of $38bn.

There is also a large concern on potential security breaches if Tsinghua acquired Micron, as the chips are likely used within US weapon systems. Neither the Pentagon nor Micron have disclosed just how prevalent the chips were within the US military, but it is feared that China could potentially use the chips to identify backdoors in the technology which could later be exploited.

Should the deal get approval, it will bolster Tsinghua’s efforts to be a guiding light in China’s expanding chip industry. Unigroup acquired China-based smartphone chip manufacturers Spreadtrum and RDA Electronics in the past couple of years, and last year secured a $1.5bn investment from Intel.