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Why Tsinghua Unigroup Might Buy A Minority Stake Or Get A Joint Venture With AMD

After failing to buy Micron, state-owned Tsinghua Unigroup might be looking for another semiconductor company to buy.

Tsinghua Unigroup plans to invest $47 billion over five years to help it become the third-largest chip manufacturer in the world.

If Tsinghua was allowed to buy a 15% stake in Western Digital, I see no reason why it could not also buy a minority stake in AMD.

AMD has competitive CPU, APU, and GPU products that could accelerate Tsinghua Unigroup’s semiconductor strategy.

I know Intel (NASDAQ:INTC) partnered up with Tsinghua Unigroup last year to buy a 20% stake in Chinese fabless chipmakers RDA Microlectronics and Spreadtrum. However, I do not think Intel would be a major partner in Tsinghua Unigroup's $47 billion plan to become the world's third-largest chipmaker. I believe troubled Advanced Micro Devices (NASDAQ:AMD) is more likely to be desperate enough to welcome Tsinghua's money.

As per the above-linked Reuters article, Tsinghua's Chairman hinted they are negotiating with another U.S.-based semiconductor company for a possible minority (not majority) investment. It is worth speculating that AMD might be this U.S. firm that could get substantial investment from Tsinghua Unigroup.

After Micron (NASDAQ:MU) rejected Tsinghua Unigroup's $23 billion takeover offer, that state-owned Chinese company was still allowed to buy a 15% stake in Western Digital (NASDAQ:WDC). Tsinghua only spent $3.8 billion to buy its minority stake in Western Digital. In my analysis, buying a 20-40% stake in AMD will just be spare change for Tsinghua.

The Chinese officials behind Tsinghua Unigroup are anxious to grow a home-grown semiconductor industry that could compete with TSMC (NYSE:TSM) and Samsung (OTC:SSNLF). Tsinghua needs access to intellectual properties for making processors for computers and mobile devices.

Being a government entity, Tsinghua has unlimited money to build chip factories. Unfortunately, Tsinghua still doesn't have the silicon intellectual property to create its own commercial GPU or CPU chip designs.

Spreadtrum only sells mobile processors based...