The Chinese government doesn't take no for an answer

Aug 29, 2015 13:19 GMT  ·  By

In a former attempt to buy Micron Technologies, the Chinese state-supported tech conglomerate Tsinghua Unigroup offered $23 billion to buy the American chip and DRAM manufacturing company. Although this was to be a healthy investment in Micron’s dwindling economic situation, the US authorities refused it under the excuse of national interest. Now the Chinese try again, this time with Tsinghua’s chairman himself leading the acquisition talks.

According to Reuters news agency, Zhao Weighuo, the chairman of Tsinghua Unigroup, arrived in Washington to talk with policy experts who are close to the Committee on Foreign Investment in the United States (CFIUS) members that initially refused the deal to give up Micron. Although there aren’t any details on whether the Weighuo will meet US politicians or lobbyists, it’s very likely he will do so, since both companies, Tsinghua Unigroup and Micron, are backed by their respective countries’ governments.

Back in July, when the first deal was proposed, members of the CFIUS refused the deal because they considered Micron a strategically important company for the government, with republican US Senator John McCain hmself raising national security concerns when hearing about Tsinghua’s attempt to buy Micron technologies. Although initially refused, the Chinese didn’t take no for an answer, and Xu Jinhong, chairman of Unigroup’s parent company Tsinghua Holdings, said in an interview that the firm could still try to acquire the maker of memory.

Deals at such levels are made or broken by politics alone

The Chinese insistence doesn’t come out of nowhere, however, since Tsinghua Holdings has board members comprised by the highest ranking figures in the Chinese government, including China’s Secretary of State Xi Jinping himself. In other words, Tsinghua throws in its entire political arsenal to win a deal from the US authorities. This, however, won’t likely happen since the US-Chinese tensions in the South-China Sea pose the two countries in a constant collision of interests, while the Chinese market is encountering one of its worst economic crises in decades.

Both the US and Chinese governments have very serious reasons to either stop this deal or, in the case of the latter, make it happen. Micron has lately revealed, together with Intel, a new groundbreaking non-volatile memory technology, the 3D XPoint, which promises huge bandwidth gains compared to modern SSDs, while China desperately needs DRAM and NAND flash manufacturing know-how, since no such memories are being manufactured in China in large volumes.

Needless to say, you can’t have advanced computer systems without state-of-the-art process technologies, intellectual property and expertise, and yes, all of this applies to advanced weapon systems as well. If a deal is reached between the US Government and Tsinghua, this will become the largest acquisition ever made by a Chinese company.