China's Tsinghua Unigroup to invest $12 billion via world's biggest private placement

By Yimou Lee and Brenda Goh

HONG KONG/SHANGHAI (Reuters) - China's Tsinghua Unigroup Ltd plans to invest 80 billion yuan (8.28 billion pounds) in a new memory chip factory via the world's largest private placement, in the latest move by the state-backed technology conglomerate to bolster its fledgling chip industry.

Tsinghua Unigroup, controlled by Tsinghua University in Beijing which counts President Xi Jinping among its alumni, has spearheaded a deal-making drive over the past year as it attempts to become the world's third-biggest chipmaker.

The cash from the share placement will also fund fresh acquisitions.

The investment will be made via a sister firm, Tongfang Guoxin Electronics Co, which said in a stock exchange statement that it would raise the cash in a placement of shares mostly funded by Tsinghua Unigroup and a firm controlled by the latter's chairman, Zhao Weiguo.

Unlisted Tsinghua Unigroup bought 36 percent of Tongfang earlier this week.

If the deal go through, it would be the biggest ever private placement in the world, beating a previous record set by Spanish lender Banco Santander SA when it raised $8.8 billion in January 2015.

"Tsinghua Unigroup's goal is to turn the new Tongfang Guoxin to a world class chip giant," the firm's chairman Zhao wrote in a statement, adding that Tongfang Guoxin would be an "important platform" for Tsinghua Unigroup's chip business.

About 60 billion yuan will be used to build a new memory chip factory, while 16.2 billion yuan will be spent on upstream and downstream acquisitions in the chip industry. The remaining 3.79 billion yuan will fund the purchase of a stake in Taiwan's Powertech Technology, announced last week.

FUTURE IN THE CLOUD

Over the longer-term, Tsinghua Unigroup is aiming to build an industry ecosystem that focuses on data-storage and cloud computing, a person with knowledge of the matter told Reuters.

It is interested in making investments in areas including chip packaging and testing, solid-state drive and chip making, the person said.

In August, Tsinghua Unigroup made an informal $23 billion takeover offer for Micron Technology that was rejected out-of-hand by the Idaho-based chipmaker's leadership.

Last month, Tsinghua Unigroup hired Charles Kau, the chief of Micron's Taiwanese joint venture, as its global executive vice president, a person familiar with the matter told Reuters..

Industry analysts expect Tsinghua Unigroup to make further investment in Taiwan's semiconductor industry, which has sparked fears in Taiwan that the island's chip industry may lose to China's state-backed drive to become a world-class player.

"Taiwan's chip industry still has good foundation and talents, but it's a shame that it doesn't have enough capital for expansion," Zhao wrote in response to questions about if it plans to invest in other tech firms in Taiwan.

"We cannot reveal further acquisition details at the moment," Zhao added.

In September, Tsinghua Unigroup announced plans to buy a 15 percent stake in U.S. data storage company Western Digital Corp, a deal that could draw regulatory scrutiny amid increased U.S. national security concerns.

China has attached strategic importance to the development of domestic semiconductor, server and networking equipment industries amid fears of foreign cyberspying.

Beijing has set goals to grow revenues of domestic chip firms at more than 20 percent each year to reach 350 billion yuan in 2020, according to a plan released by the State Council, China's cabinet, last year.

(Reporting by Yimou Lee, Brenda Goh and Elzio Barreto; Editing by Kazunori Takada and Alex Richardson)