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Tsinghua Unigroup's financial struggle to benefit SK, Samsung

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Visitors look around Tsinghua Unigroup's booth installed at the China Information Technology Expo in Shenzhen, China, in this April 2019 photo. / Captured from Tsinghua Unigroup webpage
Visitors look around Tsinghua Unigroup's booth installed at the China Information Technology Expo in Shenzhen, China, in this April 2019 photo. / Captured from Tsinghua Unigroup webpage

By Baek Byung-yeul

SK hynix and Samsung Electronics will likely experience less pressure in the memory chip sector as one of their top Chinese competitors, Tsinghua Unigroup, is suffering a liquidity problem.

Tsinghua Unigroup, a Chinese government-backed chip conglomerate, has defaulted on a 1.3 billion yuan ($197.96 million) bond, according to a report from Reuters, Tuesday, after bondholders denied its proposal to extend a repayment deadline.

The default problem immediately brought negative impact to the Chinese conglomerate as its credit rating was downgraded to BBB from AA by China Chengxin International Credit Rating.

The Chinese government has long pushed the development of the local chip industry, setting the goal of producing more than 70 percent of the chips it uses until 2025. The ambitious goal has been a major threat to Korea as the chip industry is the largest export item and the core axis of its economy.

Among China's semiconductor companies, Tsinghua Unigroup, a Tsinghua University affiliate, was regarded to have the potential to reshape the market as the company announced it would focus on DRAM and NAND flash memory chips, in which the Korean tech companies have world-class competitiveness.

Industry analysts said the financial struggle of the Chinese chip company will benefit SK hynix and Samsung Electronics.

The financial problems will deliver a blow to the Chinese company as it is sure to lose its footing in the chip market.

"If the Chinese memory chip industry, especially the NAND business, struggles, this will positively affect the global NAND business operators. In particular, SK hynix, which increased its market share twice after acquiring Intel's NAND business, is expected to log a dramatic performance," said Kim Young-gun, an analyst at Mirae Asset Daewoo Securities.

SK hynix is one of the top three DRAM players along with Samsung and Micron Technology, but its NAND business has been a headache. Its status in the NAND flash sector stagnated at the second-tier level as it came to the market late.

To turn the situation around, however, SK hynix announced last month that it signed an agreement to acquire U.S. chip giant Intel's NAND business for $9 billion. The acquisition deal is the largest deal in the industry ever made by a Korean company.

The NAND flash memory chip business has been on an upturn as digital devices such as smartphones, tablet PCs and other multimedia appliances are increasingly using NAND chips to erase and write data quickly.

While the product was widely used in mobile devices, it's now increasingly used in servers for data centers due to the advent of cloud computing.

According to a report from market researcher Gartner, the NAND flash memory chip market grew to $42.6 billion in 2019 from $30.8 billion in 2015 and the market is expected to achieve a consistent growth with more cloud computing and Internet of Things (IoT) devices being used in the future.


Baek Byung-yeul baekby@koreatimes.co.kr


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