Chinese chip giant Tsinghua Unigroup says creditor files for bankruptcy

TAIPEI / HONG KONG – China’s struggling tech flagship Tsinghua Unigroup on Friday confirmed that one of his creditors had asked a court to file bankruptcy proceedings for the group in the latest setback to the goal of the China to build an autonomous semiconductor industry.

Tsinghua Unigroup, the parent company of many chipmakers, including China’s second-largest mobile chip developer UNISOC, said it received a notice from the Beijing Municipality’s First Intermediate People’s Court. A creditor has asked the court to uphold the conglomerate’s bankruptcy protection, saying the group has not paid off its debt.

The creditor’s move comes after Tsinghua Unigroup, majority-owned by President Xi Jinping’s alma mater Tsinghua University, missed a series of bond payment deadlines since November.

“Our group will fully cooperate with the court to conduct a judicial investigation and proactively resolve debt risks,” Tsinghua Unigroup said in a statement to Nikkei Asia. “We support the court to protect the legal rights of the creditor within the laws.”

The creditor is the Hong Kong-listed Huishang Bank, a mid-sized state-owned bank based in Anhui province, according to public documents released on China’s Qichacha business data platform and a listed subsidiary in Shenzhen. The bank did not respond to a request for comment at the time of posting.

Tsinghua Unigroup has enjoyed the support of central and local governments for years as it pursued Beijing’s ambitions to create a national semiconductor industry – a crucial part of the country’s “Made in China 2025” industry initiative.

The group has formed a national champion in memory chip manufacturing – Yangtze Memory Technologies – which aims to challenge market leaders like Samsung and Micron. Its UNISOC mobile chip design unit aims to compete with Qualcomm from the United States and MediaTek from Taiwan.

Debt has fueled the group’s plans to strengthen its chip manufacturing capacity. Two high-profile projects in China led by Tsinghua – a massive 3D NAND flash memory factory in Chengdu with a total investment of up to 200 billion yuan ($ 30.8 billion) and a DRAM memory chip factory in Chongqing – have experienced significant delays and could be scrapped, Nikkei Asia first reported.

The company is seeking to sell part of its stake in UNISOC in order to raise funds.

Tsinghua Unigroup earlier this year had defaulted or triggered cross defaults on seven onshore and offshore bonds worth around $ 3.6 billion, according to Refinitiv.

Tsinghua Unigroup said a court-led restructuring would not affect the company’s legal status or its production and other operations. The group has also minimized the impact on the activity of its subsidiaries.

The group has a complex web of shareholder interests, including crown corporations and a government fund. A source said, “Semiconductors are a priority for the Chinese government. The Tsinghua Group itself could undergo judicial restructuring, but any effect on the way the companies in the group are run would be limited.

The company’s two listed subsidiaries, Unigroup Guoxin Microelectronics, a developer of security chips, and Unisplendour Corporation, which provides cloud computing infrastructure, reported annual revenue growth of 50% and 30%, respectively, in the first quarter 2021, according to Tsinghua Unigroup.

“The operation of the other subsidiaries of the group is also stable and positive,” said the group.

The two listed units noted in the documents filed with the Shenzhen Stock Exchange that in the event of a restructuring of a key shareholder, their “shareholder structure may change in the future.”

Additional reporting by Shunsuke Tabeta in Shanghai.