TCL, Unigroup set up M&A fund

Move will help to promote industrial upgrading and growth of both companies

Home appliances and consumer electronics maker TCL Corporation is setting up a 10-billion yuan fund with Tsinghua Unigroup Ltd, China's largest chipmaker controlled by Beijing-based Tsinghua University, for mergers and acquisitions, the two companies announced on Tuesday.

The fund will also be used for direct investment in the chip-making industry, TMT, and the government's key economic initiatives, including Made in China 2025 and Internet Plus.

"TCL and Tsinghua Unigroup have a profound grasp and strong influence on each other's industry, as well as rich investment experience in industrial upstream and downstream," said Li Dongsheng, chairman of TCL Corp.

"The establishment of the fund will promote the future industrial upgrading and development of both parties," he added.

Li called the deal a starting point for a comprehensive cooperation between the two companies."

They are now expected to strengthen collaboration in a number of fields, including in intelligent mobile terminal, semiconductor and capital market.

Tsinghua Unigroup became the third-largest shareholder of TCL when it bought 480 million TCL shares for 1 billion yuan through a subsidiary.

In recent years, TCL has stepped up investment in upstream and downstream industries.

In 2009, it set up China Star Optoelectronics Technology in Shenzhen to make liquid crystal display panels and smart TVs.

"As a technology company, Tsinghua Unigroup is a leader in chip and semiconductor manufacturing, while TCL serves as a terminal electronics products provider, the two sides could complement each other's advantages and achieve further development in technical field though establishing the fund," said Zhao Weiguo, chairman of Tsinghua Unigroup.

He said the fund would help cultivate the innovative ability of Chinese technical firms in the Internet Plus and Industry 4.0 era.

In 2015, Tsinghua Unigroup announced plans to invest 300 billion yuan over the next five years to become the world's third-largest chipmaker.

Zhang Yanbin, assistant director of All View Cloud, a Beijing-based consultancy specializing in home appliances, said that "the establishment of M& A fund is beneficial for the integration of the electronics industry and building up a complete ecosystem and industrial chain."

TCL's initiative conforms with the company's overall strategic layout, Zhang said.

"In the Internet era, TCL also has a demand for chips, which could be applied into the manufacturing of smart home appliances and telecommunication equipment such as smartphones. It is a business model other Chinese home appliances companies could learn from and copy."