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China’s biggest chip maker’s possible tie-Up with H-P


Tsinghua Unigroup Ltd. is in talks to buy a controlling stake in Hewlett-Packard Co. ’s China data-networking operations, Mr. Zhao, its chairman, said in an interview earlier this week. Discussions are still taking place over the 51% stake in H-P subsidiary, H3C Technologies Co., he said, in a deal that people familiar with the talks say could value H3C at as much as $5 billion.


Some of Silicon Valley’s largest firms have deepened their China partnerships in the past year. Chip maker Intel Corp. is already a partner of Tsinghua Unigroup, having bought a 20% stake last year for $1.5 billion. Intel also launched a partnership with Huawei Technologies Co. in March to make cloud solutions for telecom carriers.


Mr. Zhao’s company has drawn interest from both U.S. firms and support from China’s top officials, as Beijing strives to develop a homegrown semiconductor sector. Tsinghua Unigroup became China’s largest chip maker after acquiring two of the country’s largest mobile-chip firms, Spreadtrum Communications and RDA Microelectronics, in 2013. Intel executives said last year that they believe partnering with Spreadtrum is opening doors for the company in the low-cost smartphone market, a sector that Intel has its eye on.


Mr. Zhao said he believes that by following the lead of Chinese companies like Huawei and investing over the long term, he can build a world-class company.


Little is known about Tsinghua Unigroup outside of China. It was founded in 1988 by China’s elite Tsinghua University, the alma mater of many of the country’s top leaders, including current President Xi Jinping. It is still controlled by a university holding company and has close ties with the government through Tsinghua’s alumni network. 


Beijing’s new chip support fund announced in February it would invest 10 billion yuan in Tsinghua Unigroup in the next five years.


Tsinghua Unigroup is expanding the chip business rapidly, planning to add 1,000 employees by the end of the year to the 4,000 already on the payroll, Mr. Zhao said. He estimated chip revenue to reach $1.8 billion this year, up from $1.5 billion last year—still a drop in the bucket of the $340 billion world-wide chip market, according to tech research firm Gartner’s estimate for 2014.


Mr. Zhao said he hopes to forge more partnerships with U.S. companies such as H-P.


“I believe we are creating a new kind of model for U.S.-Chinese company partnerships,” he said.



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