SHANGHAI, China — The pending merger of two Shanghai-based fabless companies -- Spreadtrum Communications and RDA Microelectronics -- through two separate acquisitions pulled off by Tsinghua Unigroup is "not a done deal," according to several industry sources here.
China's two most successful fabless chip companies went IPO on Nasdaq several years ago. Since 51 percent of Tsinghua Unigroup is owned by Tsinghua Holdings, a 100 percent state-owned limited liability corporation funded by Tsinghua University, the Spreadtrum/RDA merger is expected to deliver a new, state-owned, consolidated entity that might become powerful enough to compete with Taiwan's MediaTek.
However, 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.
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.
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.
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