From: Council on Foreign Relations
by Ariella Rotenberg and Peng Di
Ariella Rotenberg is a research associate in U.S. foreign policy at the Council on Foreign Relations. Peng Di, a former intern for the global health program, also contributed to this post.
Just this week, the Obama administration announced publicly that it would retaliate against China for coordinating a cyber attack that resulted in the theft of over twenty million American’s personal information. While attention in the public sphere is currently focused on the administration’s policy reversal, over the course of the past few weeks many technology fiends, finance experts, and cybersecurity analysts turned their attention to the potential buyout of the Boise, Idaho-based Micron Technology Inc. by Chinese company Tsinghua Unigroup. Micron’s signature product is a memory chip that stores data in cell phones and computers—but it also manufactures high-performance flash memory products that are necessary for a variety of quick data functions ranging from online advertising to airplane technology. Tsinghua Unigroup is a Chinese state-owned company and the investment arm of Tsinghua University (the alma mater of President Xi Jinping and former President Hu Jintao). Over the course of the past couple years, Unigroup has gone on more than one acquisition spree in the semiconductor industry, acquiring companies such as Spreadtrum and RDA, positioning itself as a powerhouse in the sector. As the dust settles after the initial offer for Micron, however, several obstacles remain for the successful purchase.
If the deal were to go through, it would be the largest takeover of an American company by a Chinese one. The deal would give China the fifth-largest chipmaker by revenue and the ability to compete with industry leaders such as Samsung and SK Hynix Inc. The Chinese government has aimed for years to reduce or eliminate its dependence on foreign chip technology. Although Zhao Weiguo, chairman of Unigroup, said that his strategy was not driven by political agenda, many find the statement hard to believe given the fact that Tsinghua Unigroup received 10 billion yuan from the Chinese State this past February earmarked for investment in chip companies. There is no doubt that such a deal is currently ringing alarm bells at the Committee on Foreign Investment (CFIUS) that operates out of the U.S. Treasury Department—a panel that reviews foreign acquisitions of U.S. businesses and that the deal would face a long regulatory review should it reach final stages. It is a particularly prickly time for regulators when it comes to U.S. cybersecurity issues and the Chinese government given the recent buzz surrounding a large-scale cyber breach at the Office of Personnel Management that potentially hacked personal information of over 20 million Americans.
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