China’s Ziguang Group, which is said to be the world’s third largest cell phone chip designer, filed for bankruptcy reorganization in court on July 9. According to the Chinese media, Ziguang Group has debts of over 200 billion RMB. Lee Chung-hsien, a professor at the Department of Electrical Engineering at National Cheng Kung University in Taiwan, could not help but lament that their call to co-sign “against the opening of Chinese investment in Taiwan’s IC design industry” was criticized by industry bigwigs and even media executives, and now in just under six years, Lee said, “Seeing the bad guys now is the biggest trophy! “.
The Purple Group announced on the 9th that it received a notice from the Beijing First Intermediate Court: the relevant creditors applied to the court for bankruptcy reorganization of the group on the grounds that the group could not settle its debts as they fell due, that its assets were insufficient to settle all its debts and that it clearly lacked solvency, and that it had the value and feasibility of reorganization.
In November 2015, the chairman of China’s Ziguang Group, Mr. Zhao Weiguo, with the advantage of capital, and Taiwan’s leading memory packaging and testing company, Lixing, announced their intention to acquire 25% of Lixing at a cost of NT$19.4 billion, leaping to become Lixing’s largest shareholder and obtaining a seat on the board of directors, creating the first case of Chinese investment in Taiwan’s semiconductor industry.
Not satisfied with this, Zhao also declared at the time that if Taiwan’s laws allowed, he would facilitate a merger between Purple and IC design major MediaTek as soon as possible. At the time, Zhao also called on Chinese officials to pressure Taiwan to open up its chip (IC) industry or else ban Taiwan-branded, Taiwan-made chips and related products from being sold in China. Purple’s big move at the time caused Taiwanese scholars to worry that MediaTek would have to face the power of an entire country after the merger, fearing a loss of operational autonomy.
In 2015, Purple had enough silver bullets to attack Taiwan, and 500 scholars in Taiwan signed a joint letter to block it.
At that time, Taiwan’s academic community launched a joint petition to oppose the opening of Chinese investment in Taiwan’s IC design industry, and more than 500 scholars and experts from Taiwan’s electrical, information and other fields participated in the joint petition to block Purple’s acquisition ambitions.
Lee Chung-hsien, a professor at the Department of Electrical Engineering at National Cheng Kung University, told the station that if it had not been blocked, the most tragic subsequent effect would have been that the United States felt that Taiwan was unreliable because Taiwan’s companies had become Chinese companies, and in the clean network part, Taiwan would have been considered part of China, and the attention and trust of Taiwan’s semiconductor industry would have been transferred to rival countries such as South Korea, defending Taiwan’s most important “Silicon shield” will completely disappear.
Lee Chung-hsien: “I’m afraid that Taiwan’s position in the free world industry will have a considerable impact, and you let it in at first, now there is no way, because it is irreversible. In Trump’s U.S.-China economic war, Taiwan’s position will be very awkward, which side is it on? (China wants to) use the economy for political purposes and I’m afraid it will succeed.”
Lin Zongnan, a professor at the Department of Electrical Engineering and Institute of Telecommunications at National Taiwan University, who was also one of the participants leading the cosponsorship back then, described in an interview with this station that if ZiGuang’s entry had been successful back then, it would have been just like when Wu SanGui opened the ShanHuai Pass at the end of the Ming Dynasty and led the Qing troops into the country resulting in the fall of the Ming Dynasty, when a small door was also opened. Lin Zongnan recalled that when the DPP government was about to come to power, some officials inside thought it was okay to open a small door, and it was they who strongly discouraged it at that time.
Lin Zongnan: “As long as a small door is opened, he just enter the company, no matter how much Purple holds, he will become dominate (dominant) role. At that time, the Kuomintang to carry out the Communist Party’s downfall can be known, many people are unable to remember the lessons from history.”
Good and big? Purple grows by M&A, bends but rolls over
In an article in China Poster News, a subsidiary of China Mass Media Group, discussing “What happened to the $300 billion chip giant Ziguang, which was filed for bankruptcy reorganization?” According to the article, Ziguang Group has more than 40,000 employees worldwide, is the world’s third largest cell phone chip designer, accounts for more than 20% of the global SIM card chip market share, and is one of China’s leading cloud service providers.
The article mentions that since 2013, Ziguang Group has launched more than 60 acquisitions. It even tried to take a controlling stake in TSMC in 2015, but ultimately failed to land due to censorship, funding and other issues.
Lin Zongnan analyzed that TSMC went to Nanjing in 2016 to set up its first 12-inch fab, which was also feared to be forced by the Chinese government. Lin Zongnan mentioned that TSMC’s Nanjing plant is very special and “wholly owned” by TSMC. China often uses China’s huge market as blackmail, requiring foreign companies to do technology transfer, to gain abnormal competitiveness.
Lin Zongnan: “At that time, China’s IC design to TSMC to place orders for a lot of volume. So I guess TSMC Nanjing plant, is China to vigorously develop the semiconductor industry, asked TSMC to do so much business, I think the Nanjing plant should be the product of compromise at that time. TSMC then asked for 100% of its own operations in order that the technology would not be leaked because of the plant to Nanjing.”
Nevertheless, Lin Zongnan believes there are still hidden worries because TSMC employs local people to operate in Nanjing, and more or less confidential information on operations and manufacturing will flow out as the locals leave. Lin Zongnan said, this also explains the English “Electronic Times” reported that the United States has put pressure on TSMC, urging TSMC not to expand its foundry in Nanjing, China. TSMC responded, “This is the report of the mainland media in mid-June, currently coincides with a period of silence, do not respond to market rumors.”
Purple’s debt of 200 billion China to save or not to save?
Purple specializing in mergers and acquisitions to “overtake” the company, but in a short period of time on the rapid “rollover”. Li Zhongxian believes that a company that is too ambitious and does not develop from the root technology will be more difficult. “Simply put, there are too many crooks in China”. Do IC design should be on the ground, to do try and error (trial and error) things.
Li Zhongxian: “Whether Xi Jinping will save Ziguang is a question, because it is an indicator. If he doesn’t, it will affect his past talks and the policy part. It is worth observing that if China does not save, it represents a problem with China’s funding.”
Purple’s announcement leaves ambiguity as to whether the reorganization application filed by creditors as of the announcement date was accepted by the court, and whether the Purple Group entered the reorganization process.