Tsinghua deal to connect Western Digital to powerful China tech set

Visual from Tsinghua university website.

A billion-dollar Chinese plan to invest in Western Digital Corp is designed to plug the U.S. data storage firm into a network of influential China tech players carefully constructed by Tsinghua University, the alma mater of President Xi Jinping.

For $3.8 billion, a unit of state-owned Tsinghua Holdings Co will get a 15 percent stake in Western Digital. What Tsinghua, run by a university committee, hopes to get is the latest in a string of domestic and foreign footholds in data storage and the chip market, an area deemed of strategic importance by Beijing.

Wednesday’s Western Digital deal follows Tsinghua’s $23 billion move to buy U.S. chipmaker Micron Technology Inc as China ramps up efforts to develop chips expertise. But the Micron plan has been clouded by U.S. security concerns – and some say the Western Digital may follow suit.

“Its (Tsinghua’s) Chinese government affiliation is making its overseas acquisition more difficult,” said Fubon Securities analyst Carlos Peng.

Western Digital hopes selling the minority stake to Tsinghua’s Unisplendour Corp will help it avoid rigorous regulatory scrutiny. If the deal goes through, the California-based firm will have a new investor with a wide range of China tech units, from IT services provider Unisplendour to biotechnology firm Chengzhi Shareholding Co.

The Tsinghua network also stretches to other U.S. firms.

In May, Unisplendour announced to buy 51 percent of Hewlett-Packard’s H3C Technologies for $2.3 billion, creating a Chinese tech hub that houses H3C’s networking operation alongside its China-based server, data-storage and technology-services businesses.

Meanwhile in 2014 Intel Corp bought a $1.5 billion, 20 percent stake in two mobile chipmakers under Tsinghua’s umbrella. That provided the Chinese firm with support from a U.S. semiconductor giant on chip design and development within China itself – a landmark deal for Beijing.

“It (China) is producing its own products rather than just contract making, it’s because there’s demand from local consumption,” said Gartner analyst Tracy Tsai.

“Tsinghua, with its state-backed role, plays a key part under this background. It needs to introduce partners through mergers and acquisitions and help China boost its technology knowhow.”

(Editing by Kenneth Maxwell)

Reuters

Singapore Reporter/s

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Following vacancies can be applied for (only in Singapore).   

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Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.