China to Enter Memory Chip Industry, Shows Interest to Acquire US Chipmaker

Published By : 15 Jul 2015 | Published By : QYRESEARCH

It seems that the global memory chip industry worth US$80 billion is under threat from a Chinese entity Tsinghua Unigroup. Reports have indicated that the Chinese government-backed enterprise is interested in buying the U.S.-based Micron Technology, the third largest global memory chipmaker. The memory chip industry has been traditionally dominated by South Korean companies such as SK Hynix and Samsung Electronics, and Japanese giant Toshiba. China’s entry into the industry will rage a potential price war. Industry analysts have warned that if the state-backed enterprise acquires Micron Technology for an estimated US$23 billion, the overall industry would be heading for an oversupply.

However, this could be a good news for the consumers buying mobile devices and smartphones as the prices of the chips would come down to decrease the prices of smartphones. The global chip industry has witnessed a healthy profit growth in the last couple of years with the presence of only few suppliers, keeping a tab on the supply growth. Hynix and Samsung together dominate more than 70% of the market for Dynamic Random Access Memory (DRAM) Chips which are used for storing data temporarily on mobile devices and computers. Flash-type memory chips market is majorly controlled by Toshiba and Samsung with 53% share, followed by Micron and SanDisk. 

Analysts have pointed out that the risk of oversupply is the biggest worry for the market with the Chinese acquisition of Micron which would lead to increased capital expenditure. For China’s chip industry which is still in its nascent stage, the acquisition will be a big step. The country is the largest consumer and manufacturer of smartphones but depends largely on imported chips. This would result to the domestic companies such as Xiaomi and Lenovo relying less on foreign technologies.
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