Electronics

On July 9th, Ziguang Group issued an announcement stating, “Today received a notice from Beijing No. 1 Intermediate People’s Court, the creditor Huishang Bank said that Ziguang Group could not pay off its due debts, its assets were insufficient to pay off all debts and it was obviously lack of solvency. On the grounds of the reorganization value and the feasibility of the reorganization, on July 8, 2021, in the name of the creditor, it applied to the Beijing No. 1 Intermediate People's Court for bankruptcy and reorganization of Ziguang Group." After the news was released, it quickly fermented on the Internet, some from the media Seeing the wind is rain, the author suggests that Ziguang is going to die. Tie Liu believes that self-media reports on Ziguang’s bankruptcy are questionable.

1/The root cause of Ziguang's restructuring is high debt

In recent years, Tsinghua Unigroup has been very high-profile in the semiconductor industry.

At the end of 2013, Unisplendour first acquired Spreadtrum Communications for US$1.8 billion, and then RDA for US$910 million, integrating the top three chip design companies in mainland China. In 2015, Ziguang acquired a 51% stake in H3C for US$2.5 billion and obtained a controlling stake in H3C. In July 2015, it was reported that Ziguang intends to acquire Micron for US$23 billion, but it was banned by the US government. In October, Ziguang planned to invest US$3.8 billion to acquire a 15% stake in Western Digital and become the largest shareholder of Western Digital. Western Digital will then come forward to bypass the control of the US government and plan to acquire SanDisk for US$19 billion. But this move eventually ended with the intervention of the US government. Tsinghua Unigroup tried to spend US$5.3 billion to acquire 20% of SK Hynix’s shares, but the rumors of the acquisition ultimately came to no avail.

In addition, Tsinghua Unisplendour and TSMC have had "space talks". According to Taiwan's "Economic Daily" report, TSMC chairman Zhang Zhongmou both expressed "open attitude to the mainland China Unising Group's intention to buy shares in TSMC" and "cannot give a seat to the board of directors." Zhang Zhongmou also said, “If you want to obtain control of TSMC, you must hold more than 25% of the shares, then you must spend nearly US$30 billion, which is equivalent to NT$1 trillion.” The implication is that Zhang Zhongmou believes that few people can afford this price. affordable.

Tsinghua Unigroup is not only very rich in overseas acquisitions, but also very willing to spend money on building factories in China. The total investment in Wuhan's storage project is 24 billion U.S. dollars. The total investment in storage projects in Chengdu has also reached US$24 billion. The investment in the Nanjing Integrated Circuit Base (Phase I) project is US$10.5 billion, and the total project investment is expected to reach US$30 billion. The planned investment in the Guangzhou chip manufacturing base is reported to be as high as 100 billion yuan.

Due to the high investment and long cycle characteristics of semiconductor projects, Ziguang’s large investment cannot create high profits for it in a short period of time. As a result, Ziguang cannot make ends meet and will inevitably have high debts. On February 2, 2021, Ziguang Group issued an announcement stating that Ziguang Xinsheng, a wholly-owned overseas subsidiary of the group, had substantially defaulted on its US$2 billion debt. Data show that Ziguang Group already has 210 billion debts, and its parent company, Tsinghua Holdings, also has 340 billion debts. The high debt puts Ziguang under tremendous pressure.

2/ Ziguang's enterprises are developing well, and high debt is the law of the industry

As mentioned before, semiconductor projects have the characteristics of high investment and long cycle, and must have sufficient cash flow to support, otherwise there is a risk of breaking the capital chain. Short, flat and fast thinking is not suitable for the semiconductor industry. In this regard, domestic BOE and South Korea's Samsung are both very good examples.

For a long time, BOE has been known as the "loss king", but it is precisely relying on long-term loss-making operations that Chinese companies represented by BOE have implemented counterattacks on panels such as Sharp, Samsung, LG and other Japanese and Korean companies. Samsung and SK Hynix have relied on only two decades of loss-making operations to drive Japanese companies that once occupied more than 50% of the DRAM market from the altar, and have gained a very high market share in the field of memory chips. It can be said that it is precisely relying on the government's blood transfusion and the nationwide system that Samsung was able to defeat Japan in the field of memory chips and become the new king in this field.

In 2019, Tie Liu predicted that Tsinghua Unisplendour will experience the difficulties BOE encountered a few years ago, and will even be attacked by some media as the "loss king", but this is actually the practice of industry development, similar processes Samsung, SK South Korean companies such as Hynix have experienced it, but Samsung and SK Hynix survived under the government blood transfusion and nationwide system, and then they were able to make a difference and become the overlord of the memory chip industry.

Nowadays, some self-media mocking that Ziguang is in a debt crisis is essentially the same as some financial analysts and self-media mocking BOE as the "loss king".

It must be emphasized that several companies under Ziguang have a good momentum of development. For example, Zhanrui, which is engaged in the development of mobile phone chips and various embedded chips, has become the leader in domestic mobile phone chips after Huawei’s Kirin was out of print. Its 4G mobile phone chips and 5G mobile phone chips have been purchased by domestic mobile phone manufacturers and Sales on mainstream online shopping platforms. Ziguang Guowei achieved a revenue of 3.27 billion yuan in 2020 and a net profit of 806 million yuan, a year-on-year increase of 98.74%. Since mid-March this year, Ziguang Guowei's share price has risen by 65%, and its total market value has exceeded 100 billion yuan.

Tsinghua Unigroup’s largest memory chip has achieved a breakthrough from zero to catching up with the international mainstream within a few years. In that year, while frequently hitting walls in overseas acquisitions, Tsinghua Unigroup actively sought outstanding talents overseas with high salaries, and strictly abide by the ethical rules of international business, “only bring people without documents”, and insist that “our own technology must be developed by ourselves”. The group also hired Gao Qiquan, who is known as the "Godfather of Storage" in Taiwan Province of China. After integrating the technical teams on both sides of the strait, YMTC started its independent research and development, and completed the low-volume production of 32-layer NAND in 2017, and completed the mass production of 64-layer NAND in 2019. At present, Ziguang NAND has been applied to USB flash drives. , SSD and other products are available on mainstream online shopping platforms, and the reading and writing performance is roughly at the same level as that of international mainstream products.

It can be said that Ziguang's investment in semiconductors in recent years is huge, and the results are also remarkable. The current high debt is entirely caused by the characteristics of the semiconductor industry. As long as you survive this difficult period, you can rebirth from Nirvana and soar.

3/ Ziguang is not bankrupt, but reorganization

Some self-media claims that "Tsinghua Unigroup went bankrupt and reorganized," and even pulled up Peking University Founder, claiming that "Peking University Founder and Tsinghua Unisplendour were both bankrupt." The implication was that Tsinghua Unigroup was going to die. However, this interpretation is very debatable.

It is true that both the reports of Ziguang Company and the media reports link bankruptcy and reorganization, but this description can easily mislead the public. The "Corporate Bankruptcy Law" provides three types of judicial procedures, namely reorganization, reconciliation, and bankruptcy liquidation. Reorganization refers to the efforts of stakeholders to actively rescue enterprises that are in business difficulties and prevent the debtor’s enterprise from entering the bankruptcy liquidation process to help the debtor get rid of business difficulties and restore business capabilities. Reconciliation refers to avoiding bankruptcy and liquidation, and the creditors and debtors settle their debts by concession. Bankruptcy liquidation is a well-known bankruptcy. The company "dies" and the creditors "divide" the company's legacy.

According to the "Corporate Bankruptcy Law", creditors can only apply for reorganization and bankruptcy liquidation of the debtor, and cannot apply for settlement. Therefore, creditors cannot apply for settlement against Unisplendour. From the announcement of Ziguang Company that “it has reorganization value and reorganization feasibility, it applied to Beijing No. 1 Intermediate People's Court for bankruptcy and reorganization of Ziguang Group on July 8, 2021, in the name of a creditor.” This is obviously not an application. The bankruptcy liquidation of Ziguang, but an application for reorganization of Ziguang. The creditor's application for reorganization this time obviously recognized the value of Ziguang and believed that Ziguang has the reorganization value and the feasibility of reorganization.

It must be explained that in the case of high debts of the enterprise, reorganization is not a bad thing, because in order to protect the enterprise's "nirvana", the law provides special regulations for business during the reorganization period and provides business protection for special time periods during the reorganization period. Restrict certain right holders from exercising their powers. For example, during the reorganization period, the mortgagee shall not claim to dispose of the mortgaged property for priority payment. In layman's terms, Ziguang mortgages the equipment and plant to the bank. If the debt is not repaid at maturity, the bank can claim to sell the equipment and plant to receive priority. However, after the court accepts the reorganization application, the bank cannot claim the mortgage, and can only claim the mortgage after Ziguang completes the reorganization or bankruptcy and liquidation after the reorganization fails. It can be seen that the reorganization is not a punishment for Ziguang, but a protection for Ziguang.

In short, some self-media reports that Ziguang can be called "gloating for misfortune" are completely misleading the public. As for the reason for this situation, on the one hand, it is related to the low threshold of self-media and lack of professionalism; on the other hand, I don’t know if it is because Ziguang’s series of shots are too "local tyrants", causing some people to get "red eye disease", so they are pregnant with " With a mentality of "an enemy of the rich", Ziguang will be sour whenever there is a negative news.

4/ Conclusion

In view of the fact that chips are no less important to the country than food, and Ziguang’s next batch of semiconductor companies have indeed made tangible results. In this case, policymakers will not give up Ziguang easily. The probability of bankruptcy liquidation is extremely small, and it is a high probability event to get Ziguang out of the debt crisis through capital operation. As for trading techniques, it can be weight reduction, such as selling well-performing companies such as Xinhua Three, Zhanrui, and Ziguang Guowei to state-owned companies; or blood transfusion, such as introducing new strategic investors.

Tie Liu believes that if China wants to achieve chip self-sufficiency, the best learning template is South Korea. In the 1980s, Samsung and other companies in South Korea took full advantage of the cyclical characteristics of the memory industry and used the national system as a bargaining chip. Under the environment of falling prices and overproduction, they expanded their production wildly and further reduced product prices through large-scale production. , Which triggered a price war and caused widespread losses for memory chip companies. Then rely on continuous loss-making operations to squeeze competitors, and become bigger and stronger in the fierce market competition.

Now, Ziguang is walking on this road. He is an explorer in this area and will inevitably encounter huge losses. In fact, Zhao Weiguo recognized the problems in this regard and stated a few years ago that he planned to raise 370 billion yuan to prepare sufficient "ammunition" for the next five years.

Nowadays, the reality is more severe than expected. Tie Liu hopes that Ziguang can survive this difficult period through capital operation. With the help of the state, it will take the road of Samsung, leaving nowhere for American, Japanese, and Korean manufacturers to go!