Home » SoC » The (said to be) contra MediaTek play of Tsinghua Unigroup with attempted merger of Spreadtrum and RDA

The (said to be) contra MediaTek play of Tsinghua Unigroup with attempted merger of Spreadtrum and RDA

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锐迪科并购陷僵局:清华系基金与上海资本恩怨凸显 (RDA’s acquisition deadlock: Tsinghua University unit and Shanghai Capital Fund scores highlights) [April 15, 2014]

… In September of last year, Shanghai Pudong [上海浦东] branch cast M&A of RDA, then Unigroup stepped that up by paying higher prices. But because of “fait accompli”, procedurally irregular for National Development and Reform Commission, it was halted [by the commission]. …

According to the official website of Unigroup  announced the news, Spreadtrum is expected to be over one billion U.S. dollars in 2013 sales revenue. But this order of magnitude, in the chip market waves of mobile terminals are likely to stir even afford. The first quarter of 2014, MediaTek revenues had reached $ 1.3 billion, more than a full year is expected to reach $ 4.5 billion, while the leader Qualcomm first-quarter revenue has exceeded $ 6.5 billion, the annual $ 20 billion is expected to be up above.

Leaving the above, rather raw translation by Google and Bing (with a little edit of mine besides the merger of two), it is better to give quotes from:

… over the last few months, the proposed deal has triggered raw emotions and turmoil among RDA employees who object to it. Chairman and CEO Vincent Tai, who reportedly resisted the Tsinghua Unigroup’s acquisition plan, was fired by the RDA board late last year.

One senior executive at RDA told EE Times Thursday, “We want Vincent back.” Clearly, he isn’t alone with that sentiment.

Several sources in the industry — both inside and outside RDA — point out that the huge cultural differences between RDA and Spreadtrum will make it tough to run the merged company effectively. And they say that Tsinghua Unigroup, whose purpose in acquiring the two companies is to make money by quickly making the consolidated entity go public in China, should know better.

Cultural difference
Compared to the more agile and free-spirited RDA, Spreadtrum is a much bigger corporation where engineers are known to be highly regimented, working in a modern “feeding” machine-like environment. RDA is China’s RF IC leader, while Spreadtrum has grown big by leading China’s home-grown TD-SCDMA baseband market.

Also brewing behind the scenes is an on-going feud between Shanghai and Beijing, according to several local sources. Shanghai, a much richer city than Beijing, pays a heavy tax levy to China’s central government.

It was originally the Shanghai Pudong Science and Technology Investment Co. that proposed, last September, to buy RDA. The deal, however, fizzled when Tsinghua Unigroup barged in and proposed to buy RDA at a higher price.

It was a huge blow to the Shanghai-based investment firm. It had to watch the Beijing-based company come into its own backyard to sweep up the two most successful fabless companies in Shanghai.

No pre-clearance
Several industry sources in Shanghai pointed out that Tsinghua Unigroup acquired RDA without a permit from China’s central government. More specifically, Tsinghua Unigroup, at this point, still lacks pre-clearance for the merger from the National Development and Reform Commission of China.

The RDA senior executive told EE Times, “Without pre-clearance from the government, this deal is not done.” He acknowledged that uncertainty about the future is doing damage to customers and to the morale of employees.

Merger Pits Mysterious Tsinghua Unigroup vs. MediaTek [EE Times, Nov 14, 2013]

Through Tsinghua Unigroup’s initiative to acquire the leading TD-SCDMA baseband chip vendor Spreadtrum Communications (announced in July) and now China’s RF IC leader RDA Microelectronics (disclosed earlier this week), hopes are running high in China that its domestic electronics industry might finally get a consolidated entity powerful enough to compete with Taiwan’s MediaTek, if not quite an equivalent to Qualcomm in the United States.

While many Chinese industry sources see the recent development positively, opinions differ about what comes next. Some Chinese executives view Tsinghua Unigroup’s move as “a pure financial play,” while others put more stock in a behind-the-scenes ploy by the Chinese government to strengthen China’s electronics industry. Others even go further, predicting a doomsday scenario for other Chinese fabless companies such as Allwinner and Rockchip.

Here are the basics. Tsinghua Unigroup is 51 percent owned by Tsinghua Holdings, a 100 percent state-owned limited liability corporation funded by Tsinghua University in China. Forty-nine percent of Tsinghua Unigroup is owned by private entity — Jiankun Investment Group Co., Ltd. — controlled by Zhao Weiguo.

Weiguo serves as Chairman and Chief Executive Officer of Tsinghua Unigroup.

According to one Chinese electronics industry executive, Weiguo is “playing the whole game by leveraging Tsinghua resources and getting enough bank loans for supporting this deal.” He called Weiguo “a real businessman and understands China economics/complicated politics and capital market very well.” In short, Weiguo is “somebody who can smell blood from thousands miles away.” He is set to make money investing in the high-tech sector, rather than the real-estate business, which isn’t looking good right now in China.

… Chinese industry source said, “The notable thing about Tsinghua Unigroup is that it has a market cap of $820 million, less than what they proposed to RDA.” He suspects that the real buyer of RDA is “not Unigroup, but a $2-$3 billion fund which is related to Unigroup.” He then added, “That’s the beauty of China’s state-owned public companies: there is nothing transparent.”

Those who see Tsinghua Unigroup’s acquisitions as “a pure financial play” pose a three-step scenario. First, the consolidation of China’s two leading fabless chip companies (Spreadtrum and RDA are currently both public companies traded in Nasdaq) will help them both survive before the two companies get clobbered by MediaTek. Second, by going private again under the umbrella of Tsinghua Unigroup, the two companies will gain more leeway in business development — in addition to access to the IP portfolio of Tsinghua Unigroup and Tsinghua University. Third, the new Spreadtrum, consolidated with RDA under Tsinghua Unigroup, will “go public in the near term,” the sources said. Tsinghua Unigroup won’t waste time making a big financial gain by doing so, they added.

Where everyone agrees is about the complementary roles RDA and Spreadtrum can play under the new structure.

One Chinese semiconductor industry observer explained, “Spreadtrum is weak in everything except TD-SCDMA, while RDA is strong in RF. Both are weak in application processors.” Further, he added, “Spreadtrum’s IC R&D is weak, but strong in software. Meanwhile, RDA is very strong in IC R&D, but has no real software development.” As a result, combining these two “means doomsday for Allwinner and Rockchip,” he noted, because Spreadtrum and RDA could ramp up tablet application processor efforts.

The Chinese industry’s expectation is that the final entity (new Spreadtrum-RDA) will focus more on new wireless technology R&D, while they will spend less time competing in a declining low-end market. As for the market in feature phones for GSM, the serious competition comes down to just MediaTek and Spreadtrum, they explained.

Asked about the latest shopping spree by Tsinghua Unigroup, Will Strauss, president of Forward Concepts (Tempe, Arizona), noted that he knows almost nothing about Tsinghua Unigroup. But he added, “Actually, if you wanted to create a China-based company that could (with a lot of work and a lot of money) someday rival Qualcomm, Spreadtrum and RDA are the two companies that I would pick.”

Facts lying behind such news:

2.  During the course of today’s board meeting approving the entry of the merger agreement with Tsinghua, some of our directors and officers received an unusual and erroneously dated non-binding proposal.  Such proposal was sent from a private QQ email account alleging to be from a PRC-incorporated 3rd party (the “PRC Party”). This PRC Party has never previously contacted our company before or during the evaluation process, nor has it engaged in a semiconductor business to our knowledge.  Such proposal, strangely dated as of September 27, 2013 initially, stated a higher-than-US$18.50/ADS cash offer subject to unspecified combination of equity and debt financing.  The proposal was signed but not sealed by the PRC Party, which suggests a deficiency in the formality of due execution by a PRC incorporated entity. 

3.  Our Board immediately instructed our advisors to reach out to the PRC Party, with the objective of seeking further information and verifying the intent and credibility of such party.  The proposal from the PRC Party also refers to a highly confident letter that the PRC Party claimed it has obtained from several leading financial institutions. Our legal advisor promptly spoke with the sender of such proposal, who claimed he did not know anything about the proposal other than being instructed to send the proposal via his personal QQ email account. The sender also referred our legal advisor to the PRC Party’s in-house counsel.  Our legal advisor then spoke with such in-house counsel, who was not able to provide contact information of any of their project team members, including the signatory of the proposal letter.  Given that we were not able to obtain any credible information about the financial capability of the PRC Party, we have also conducted a public search which indicated that the PRC Party was incorporated in 2011 with a registered capital of RMB60 million (less than US$10 million).

4.  Our Board has determined that based on the currently available information, we have no basis to believe that the unusual proposal from the PRC Party is credible.

… an unsolicited, preliminary non-binding proposal letter dated September 27, 2013 from Shanghai Pudong [上海浦东] Science and Technology Investment Co., Ltd. (“PDSTI” [浦东科]), a wholly state-owned limited liability company directly under Pudong New Area government of Shanghai, pursuant to which PDSTI proposes to acquire all of the outstanding ordinary shares of the Company (the “Shares) and American Depositary Shares of the Company (the “ADSs,” each ADS representing six Shares), in each case other than those Shares or ADSs owned by PDSTI and its affiliates, for US$2.5833 in cash per Share or US$15.50 per ADS. … The Company’s Board of Directors is reviewing and evaluating PDSTI’s proposal. …


RDA Microelectronics (Nasdaq:RDA) (“we” or the “Company“), a fabless semiconductor company that designs, develops and markets wireless systems-on-chip and radio-frequency (RF) semiconductors for cellular, connectivity and broadcast applications, today provided the following comments regarding certain recent media reports:
It has come to our attention that there are certain media reports containing inaccurate information on our announced merger transaction (the “Merger“) with Tsinghua Unigroup Ltd. (“Tsinghua Unigroup“) which may be misleading to investors. We are providing the following clarifications in view of potential misinformation, and to re-assure the investors that our board of directors (the “Board“) has been acting, and will continue to act, in the best interests of our shareholders as a whole:
  1. Before we entered into a definitive merger agreement (the “Merger Agreement“) with Tsinghua Unigroup on November 11, 2013, the Board conducted a robust, comprehensive and structured evaluation process of strategic alternatives. The Board considered a wide range of relevant factors, analysis and data points available, with a focus on the commercial terms and closing certainty of various available alternative. After such process, the Board determined that Tsinghua Unigroup’s proposal was clearly the most favorable and certain offer among all the proposals that we had received and therefore selected Tsinghua Unigroup as the preferred buyer over other bidders, including Shanghai Pudong Science and Technology Investment Co., Ltd. (“PDSTI“), on November 8, 2013. The Board further approved unanimously the entry into the Merger Agreement with Tsinghua Unigroup on November 11, 2013.
  2. During the evaluation process, the Board informed all interested buyers that the Board would select the preferred buyer based on the commercial terms and the closing certainty of the received proposals. Until the Board approved the signing of the Merger Agreement with Tsinghua Unigroup, we had not entered into any definitive agreement with, or promised any signing schedule to, any person (including PDSTI) regarding a sale of the Company.  
  3. We have been maintaining close discussions with Tsinghua Unigroup regarding the regulatory approvals required to complete the Merger, and have provided Tsinghua Unigroup with assistance and information in such regard in compliance with the Merger Agreement. We and Tsinghua Unigroup will continue to cooperate with each other in obtaining the relevant approvals that are required for the consummation of the Merger. We also understand from Tsinghua Unigroup that it is on track to obtain the preclearance of the Merger from the National Development and Reform Commission of China.
About RDA Microelectronics
RDA Microelectronics is a fabless semiconductor company that designs, develops and markets wireless system-on-chip and radio-frequency semiconductors for cellular, connectivity and broadcast applications. The Company’s product portfolio currently includes baseband, radio-frequency front-end modules, power amplifiers, transceivers, Bluetooth system-on-chip, Wi-Fi, Bluetooth and FM combo chips, FM radio receivers, set-top box tuners, analog mobile television receivers, CMMB mobile television receivers, walkie-talkie transceivers and LNB satellite down converters. For additional information, please see the Company’s website at http://www.rdamicro.com.

… Mr. Tang succeeds Mr. Vincent Tai, who will remain as a non-executive director until the next shareholders meeting. … Mr. Tang said, “On behalf of the Board, I want to thank Vincent Tai for his contribution to RDA during his term as the Chairman and Chief Executive Officer. …” …

Mr. Wei is a co-founder of the Company and has been the Company’s Chief Technology Officer since its inception in 2004 and a director since 2005. Mr. Wei has almost two decades of experience in CMOS radio-frequency integrated circuit design. Prior to co-founding RDA Microelectronics, he was a vice president of Analogix Semiconductor Inc. in the United States from 2002 to 2004. From 1998 to 2002, he was an integrated circuit design manager at Marvell Semiconductor Inc. in the United States, and from 1994 to 1998, he was an integrated circuit design engineer at LSI Corporation (formerly known as LSI Logic). Mr. Wei received a Bachelor of Science degree in physics from Peking University in China and a Master of Science degree in electrical engineering from the University of Minnesota in the United States.

… Completion of the Merger remains subject to the satisfaction or waiver of other customary closing conditions set forth in the Merger Agreement, including the receipt of the required regulatory approvals.

… The RDA8860 integrates an RF transceiver, WCDMA modem, EDGE modem, application processor, power management unit, analog baseband, and 32kHz oscillator onto a single 40 nanometer die, significantly reducing the customer bill of materials. Built around a 1GHz ARM ® Cortex™-A5 processor with a 256KB L2 cache, the chip uses 400MHz 32-bit LPDDR2 memory, which supplies 3.2GB bandwidth to create a powerful platform for low-cost mobile devices. It supports WiFi, Bluetooth, and GPS connections through various peripheral interfaces and leverages a dedicated CPU, accelerator and memory for the WCDMA/EDGE modem sub-system to further improve performance of the application processor. The chip’s video processor supports 720p H.264 video playback at 30 frames per second combined with Vivante Corporation’s integrated 3D GPU for high-end graphic interface and gaming capabilities. The RDA8860 is designed for smartphone devices running on Android 4.0 operating system and above.

“We are pleased to launch our first WCDMA baseband solution, a fully integrated SoC that greatly increases our addressable market as well as our handset silicon value,” commented Shuran Wei, CEO of RDA Microelectronics. “Low-cost WCDMA smartphones are one of the largest growth drivers in emerging markets today as subscribers in markets such as China continue to transition from feature phones to more advanced devices. The 8860 uses similar production tools as our market-leading feature phone platform, enabling handset manufacturers to easily and quickly migrate to our WCDMA smartphone platform. By offering a fully integrated SoC solution with lowered bill of materials, RDA has once again positioned itself as a price performance leader in a robust growth market.”

RDA Microelectronics Announces Sampling of WiFi Combo Chip With GPS for Mobile Applications [press release, April 10, 2014]

… The RDA5992 single chip solution integrates an 802.11b/g/n MAC, PHY, 2.4Ghz radio, power amplifier and antenna switch with a GPS receiver featuring advanced RF design, a baseband signal processing engine and MIPS compatible XCPU processor to achieve superior positioning performance. The integrated WLAN, Bluetooth and FM capabilities can work simultaneously or independently at low power consumption levels to preserve battery life in mobile devices.

“By adding GPS functionality to our popular WiFi combo chip, RDA offers customers all of the necessary connectivity components on a single CMOS chip for handheld devices,” said Shuran Wei, CEO of RDA Microelectronics. “GPS positioning and location-based services are becoming increasingly prevalent across all mobile applications. The 5992 is the smallest chip of its kind and further demonstrates the strength of RDA’s integration capabilities. Manufacturers can quickly and easily integrate the chip into their designs to achieve rapid time to market at a reduced cost.”


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