Exclusive: Unigroup-Backed Phone Chip Designer Valued at $9.1 Billion, Plans to Kick Off IPO Process Next Year

Unisoc, a Tsinghua Unigroup-backed mobile phone chip designer, is nearing completion of a funding round valued at approximately 66 billion yuan ($9.11 billion), falling short of its previous target [para. 1]. The round, over 4 billion yuan, involves investors such as the Shanghai Municipal State-owned Assets Supervision and Administration Commission, Beijing Jingguorui Equity Investment Fund Management Co. Ltd., ICBC Capital Management Co. Ltd., BOCOM Financial Asset Investment Co. Ltd., and PICC Capital Equity Investment Co. Ltd. [para. 2]. Additional participants include China Securities Co. Ltd., Guotai Junan Securities Co. Ltd., and Hony Capital [para. 2]. This funding, along with a 3.2 billion yuan syndicated loan secured in March, is expected to sustain the company until its IPO, planned for listing on Shanghai’s STAR market next year [para. 3].

Unisoc, based in Shanghai, primarily manufactures chips for consumer electronics, reporting revenues of 14 billion yuan in 2022, up by approximately 20% from 11.7 billion yuan in 2021 [para. 5]. Despite not yet turning a profit, the company is expanding its 5G chip business with aims to break even by 2025 [para. 4]. Given the challenging fundraising environment for domestic chipmakers, Unisoc’s ability to secure substantial funds is noteworthy, significantly aided by support from the Shanghai government and Tsinghua Unigroup [para. 6]. Complications arose due to leadership changes and shareholder disputes over employee stock incentives [para. 7].

Unisoc’s previous major fundraising was in April 2021, raising 5.35 billion yuan and setting its valuation at around 60 billion yuan, with plans to list on the STAR Market [para. 8]. These plans were postponed due to Tsinghua Unigroup’s bankruptcy and subsequent reorganization, which saw the company taken over by Beijing Jianguang Asset Management Co. Ltd. and Wise Road Capital Ltd. in July 2022 [para. 9]. A STAR Market listing requires the actual controller, now the PE firms, to be in charge for two years [para. 10]. Tsinghua Unigroup remains the largest shareholder with a 35.23% stake [para. 11].

Exploring alternative financing options in early 2023, Unisoc presented potential investors with two proposals: one from Unigroup and another from the management team led by then-chairman Wu Shengwu, revealing internal disagreements [para. 13][para. 14]. Wu, appointed as Unisoc’s chairman in February 2022, aimed to raise 15 billion yuan at a valuation of 70 billion yuan, targeting all pre-IPO funds and expansion into the automotive chip market [para. 17]. Despite securing term sheets worth over 15 billion yuan by June, some investors demanded repurchase agreements which Unigroup rejected [para. 18].

Disputes among shareholders over employee stock incentives, dating back to earlier promises of stake distribution which never materialized, led to ongoing litigation and a freeze on 8.37% of shares held on behalf of employees [para. 20][para. 21]. Wu's resistance to Unisoc’s acquisition of the consortium’s smartphone chip joint venture, JLQ Technology Co. Ltd., further strained relations [para. 24]. Unigroup subsequently removed Wu in June 2023 and replaced him with Ma Daojie [para. 25].

The PE consortium, now controlling Unisoc's financing efforts, faced a challenging environment due to scrutiny of unprofitable companies and the economic downturn [para. 27]. The latest round of funding keeps Unisoc’s valuation relatively low with new funds allocated for sustaining operations [para. 29]. Government support remains due to Unisoc's potential to rival major industry players like Qualcomm and MediaTek [para. 30]. The company leverages 4G and older chips for revenue while expanding its 5G market share, with 26 million smartphone processors shipped in the first quarter of this year [para. 32][para. 33]. Unisoc's strategic opportunities lie in AI-embedded system chips and automotive chips, offering alternatives to Qualcomm [para. 34].