Article | Xie Zefeng
Editor | Yang Xuran
Produced | tide-biz
The judicial reorganization case of Purple Light Group, which lasted for five months, has finally settled. Ali, originally considered as the most promising by the outside world, was unexpectedly defeated. The consortium formed by Jianguang and Zhilu became the final takeover party.
Such an outcome is both reasonable and unexpected. Over the years, people have been used to and even recognized Ali’s “buy all” story script, but this time it is different.
At present, both China and the United States have launched the most rigorous audit investigation in the history of Chinese Internet companies listed in the United States. Didi “returned to the United States and went to Hong Kong”, and the attention to information security at the political, regulatory and capital levels has risen to an unprecedented level.
It is rumored that if Ziguang Group is eventually acquired by Alibaba, it may face the risk of sensitive information disclosure. Although Alibaba has done nothing, its identity as a “US listed company” is enough to make the failure of its bid seem “reasonable”.
On the same day, Tsinghua University proposed to give 100% equity of Tsinghua Holdings to Sichuan Energy Investment. Tsinghua Holdings currently holds 51% equity of Ziguang Group.
This company, one of the enterprises most expected to assume the responsibility of the rise of the national chip industry, has once again reached the crossroads of its development process. In this big play, Ali became the largest supporting role, accompanied all the way and finally missed, and passed Ziguang, the core asset of China’s chip industry.
The fate of purple light
As an enterprise that has the most hope to provoke the rise of the national chip industry, Ziguang finally failed to escape the fate of bankruptcy and reorganization.
How tragic the heroic words were, how sad the ending is now. While the domestic semiconductor industry is maturing, Ziguang has encountered difficulties – seeing him rise high, see his guests, see his building collapse.
The field of integrated circuit is a typical “heavy investment, slow return” industry. In the early stage of its entry into the chip industry, Ziguang has always adhered to the strategy of “curing diseases with powerful drugs”, and hopes to quickly complement the weaknesses of Chinese chips through large-scale capital mergers and acquisitions.
This strategy is clear and can be effective in the short term. In just a few years, Ziguang has successively acquired 51% of the shares of Spreadtrum Communication, Ruidico Microelectronics and Xinhua Sansan. Afterwards, it merged Spreadtrum and Ruidico into Ziguang Zhanrui, and set up Yangtze River Storage with great efforts, and started Wuhan Storage Base.
According to statistics, in the past six years, Purple Light has gone downhill like a tiger, and the Group and its subsidiaries have launched merger and acquisition offers to more than 20 enterprises, using more than 100 billion yuan of capital. By the end of June 2020, the total assets of the Group were nearly 300 billion yuan.
In 2015, Unisplendor’s acquisition of Micron Technology and Western Data was blocked, and it began to turn to independent research and development. However, Ziguang’s “excessive worship” of capital power has not stopped, including the leveraged acquisition of Linxens, and various puzzling investments in A-shares and H-shares.
This strategy of opening and closing will eventually “backfire” itself. By the end of June 2020, Ziguang Group’s interest-bearing debt had accumulated to 156.691 billion yuan, and the debt due within one year was as high as 81.428 billion yuan, accounting for 51.97%. The short-term debt repayment pressure was huge. By the end of the third quarter of 2020, the total assets of Ziguang Group were 300753 million yuan, the total liabilities were 210686 million yuan, and the asset-liability ratio was 70.05%.
Although Ziguang has actively sought to resolve the debt crisis since 2020, it has not been fundamentally resolved. In July this year, Huishang Bank proposed to the court that Ziguang Group should undergo bankruptcy and reorganization, which became the last straw to crush the camel, and also announced that Ziguang had entered the path of reorganization.
However, in the end, Purple Light has laid a strong foundation for China’s chip industry:
With Xinhua No.3 as the core, Ziguang has become the leader of the new generation of IT services in the world, and its net profit is expected to reach 2.2 billion this year;
Ziguang Guowei is the “top” player of special chips in China. Its performance has continued to explode since 2020, with a market value of more than 130 billion yuan;
Ziguang Zhanrui is the third 5G chip enterprise in China besides Huawei HiSilicon and Mediatech;
Changjiang Storage has shouldered the task of zero breakthrough in China’s memory chips, and competed with the flagship of Samsung, SK Hynix, Intel and other giants.
It needs to be clear that the debt crisis of Ziguang stays at the group level, and the operations of its listed companies and core subsidiaries are not affected. Purple light is a bit unlucky. Today’s Ziguang’s various industrial lines are showing a trend of vigorous development. Both Ziguang Shares and Ziguang Guowei are the best periods in history. However, the group level has turned sharply downward due to debt problems.
After the overall undertaking of the joint venture of Jianguangzhi Road, considering that both sides have enough deep accumulation in the chip industry, the purple light is also worth looking forward to.
It is a pity for Ali to miss the purple light.
After more than three months of competition, the only seeded players to restructure Purple Light are the consortium of Ali and Zhejiang State-owned Assets, and the consortium of Zhilu Jianguang. In addition, Alibaba is generous, and the highest offer reached 60 billion, which is 10 billion higher than its competitors.
It is said that the consortium of Alibaba and Zhejiang State-owned Assets could enter Ziguang only after being approved. Alibaba’s senior management is in a good position to win this and has started to advance the details after taking over Ziguang Assets.
But at the last moment, Alibaba suffered from its identity as a “listed company in the United States”. In the field of integrated circuits, policy, information security and even political game are objective measurement standards and basic factors that must be considered, just as the overseas acquisition of Ziguang was blocked in that year.
In contrast, Zhilu Jianguang not only has government background, but also has been deeply cultivated in the semiconductor industry for a long time. According to incomplete statistics, the enterprises invested and acquired by both parties include: Ampelon Semiconductor, Hillsen Technology, Specco, United Technologies, Anser Semiconductor, Swiss Fuba, Austrian Semiconductor, etc.
Among them, there is the largest semiconductor acquisition in China by far – the acquisition of Anser Semiconductor, which is owned by NXP, with a total investment of 2.8 billion US dollars, and finally won by Wentai Technology. After the integration, Wentai Technology also soared to 100 billion chip enterprises.
Since 2015, Jianguang and Zhilu have led more than half of the transactions in China’s semi-guided large-scale mergers and acquisitions, involving the whole industrial chain ecology of materials, IC design, manufacturing, packaging and testing.
Since this year, Zhilu has acted frequently. Just entering December, it spent about 9.3 billion yuan to acquire four packaging plants in Chinese Mainland under SunMoon, the world’s largest chip packaging and testing manufacturer; In November, Zhilu Capital announced the acquisition of ePAK, the world’s top four semiconductor vehicle supplier.
Although not as famous as Alibaba, it can be seen that Zhilu Jianguang’s accumulation in the chip field is far better than that of Alibaba, and many successful cases are ahead of it. It seems more confident to take over Ziguang.
Ali is still “halfway to becoming a monk” on the way to chips. At the Hangzhou Yunqi Conference on September 19, 2018, Alibaba announced the establishment of a chip company, “Pingtouge” Semiconductor Co., Ltd.
In the past two years, Alibaba has been “unfavourable”. Ant Financial Services has been suspended from listing and suffered a “sky-high price fine” of 18.228 billion yuan. Under the pressure of anti-monopoly supervision, the Internet giants have tried to move from the soft Internet business to the hard technology AI and chip industry, which is a strategic consideration of “sharing the country’s worries”.
Despite its rapid development, Alibaba has not rich experience in integrating the semiconductor industry. In addition to the wholly-owned Zhongtianwei, Cambrian, Barefoot Networks, Shenjian, Kneron, and Aojie Technology (ASR) are VC level investments.
From the current historical point of view, Ali’s loss of the purple light has certain inevitability. The chip competition has already become a national strategy. At the time when Sino-General shares encountered the most stringent review in history, the integration of Ziguang into the Alibaba system can only cause more trouble for both sides.
Therefore, although Alibaba has some commercial regrets, such an arrangement is more in line with the current situation.
A long chase
If Ziguang’s business strategy is “from core to cloud”, then Alibaba’s strategy is “from cloud to core”, and finally achieve “core cloud integration”.
When the poor financial results triggered a sharp drop in the share price, Alibaba Cloud has become one of the few growth engines that Alibaba can rely on. According to the latest data of the first quarter, Alibaba Cloud achieved revenue of 20.07 billion yuan, up 33% year on year, exceeding the market expectation of 19.086 billion yuan. But it still hasn’t returned to the previous 50% growth rate.
Due to the importance of information security, Alibaba Cloud, Tencent Cloud and even Huawei Cloud have seen their market share decline, while China Telecom Tianyi Cloud and Mobile Cloud have an increasing voice in the market. Ali needs the help of the “national team” to consolidate the first position in China.
After joining the Ziguang and Tsinghua Holding Systems, the strength of Xinhua Three has increased greatly, and many IT information products have steadily ranked the first in China, especially in the government cloud and server market, which is exactly what Alibaba “dreams of”.
The foundation and core of cloud is chip. Alibaba’s current development strategy is “one cloud with multiple cores” and “deep foundation”.
When the Dharma Academy was founded, Ma Yun said: “The Dharma Academy must also surpass Intel, Microsoft and IBM, because we were born in the 21st century.” This shows Ali’s ambition to enter the hard technology industry.
In the field of chips, Alibaba, an internet-based company, chose to cooperate with ZTE, which is the only independent embedded CPU IP Core company in the mainland to develop cloud chip architecture for the Internet of Things segment.
In 2018, Alibaba accelerated its entry into the chip industry. In April of that year, Alibaba acquired Zhongtianwei; In September, after the establishment of Pingtouge, Alibaba officially started the road of self-developed chips.
In the past three years of core building, Pingtouge has successively launched the processor IP black iron 910, AI reasoning special chip including light 800, which has been put into commercial use; In October of this year, Pingtou brought out the generic ARM server chip Yitian 710, which is said to be the strongest in the industry. Its performance has exceeded the industry benchmark by 20%, and the energy efficiency ratio has increased by more than 50%.
Yitian 710 is an important step for Alibaba Cloud to promote the “one cloud multi-core” strategy. It is also the first CPU chip built for the cloud. It will be deployed in Alibaba Cloud data center.
At present, Alibaba Core is basically “self-produced and self-sold”. For example, the light 800 has improved the recognition and calculation ability of Taobao Shanghai volume pictures; Yitian 710 will be applied in Alibaba Cloud data center; Feather Array 600 is applicable to logistics, warehousing, retail and other scenarios; Hyundai 910 focuses on the future and is committed to promoting the development of AI, 5G and smart cars.
Alibaba’s development strategy is more robust and practical. Apple and Tesla both improve the performance of their products through self-developed chips. After all, compared with suppliers, only you can better understand the current business needs and build a perfect ecosystem.
At present, Pingtouge and even the Dharma Academy are still in the initial stage, and it is still very far away to achieve the goal of “surpassing Intel, Microsoft and IBM” in Ma Yun’s words.
Considering that all countries around the world are very cautious about chip M&A, if the way of M&A is blocked, it will be very difficult to break the monopoly through the way of independence, even “it will be extremely difficult and dangerous.
Although Ziguang has not really come up with a sharp sword to compete with international giants, it has a layout in the most scarce areas in China: 5G chips have Ziguang Zhanrui, which is compared with Qualcomm, Apple and MediaTek; The storage chip has Yangtze River storage. It is expected to compete with Samsung and SK Hynix to achieve a breakthrough in domestic zero; In terms of special chips, Ziguang Guowei, which is catching up with Celine and Intel (Altra).
In addition, Linxens, acquired by Purple Light Group, is a global leader in smart card micro connectors, RFID antennas and embedded parts.
Therefore, Alibaba missed the purple light and lost the opportunity to rapidly consolidate its core cloud industry strength. Considering the objective law of the development of the chip industry, Alibaba needs a longer time to surpass the European and American giants by independent research and development.
Write at the end
Although the bankruptcy and reorganization of Ziguang Group had “bad luck”, it was more caused by too aggressive tactics.
History cannot be rewritten. If Unisplendor successfully acquired the shares of Micron and Western Digital in 2015, the outcome may be completely different – the chip price fell to the lowest point in 2015, which is a rare historical opportunity for mergers and acquisitions.
But as mentioned above, in the special industry of chips, there are more influential “invisible hands” besides the basic business principles. Therefore, it is normal that things fail to meet people’s wishes, and enterprises fighting in the market can only accept it.
For Ziguang, the dawn has finally arrived, and more capital accumulated in the industry has been taken over. The rebirth of Nirvana is worth looking forward to; For Ali, although it is regrettable, it is not unacceptable.
More importantly, for the national chip industry, this arrangement is more in line with the current situation and more conducive to long-term development. After all, this is a battle that cannot be lost.
Article | Xie Zefeng