One of China’s most prominent technology tycoons, Zhao Weiguo, has mysteriously vanished, having apparently fallen foul of Xi Jinping’s government, according to Chinese business site Caixin.
Zhao, 54, led the now cash-strapped chipmaking giant Tsinghua Unigroup for a decade, says the Financial Times. But he has been “out of contact” since mid-July after “being taken from his home by authorities”. According to local media, he is “under investigation by officials in Beijing”.
Zhao’s downfall marks the latest “in a series of epic corporate collapses” featuring aggressive Chinese dealmakers, who rode a decade-long, debt-fuelled international acquisition spree, and have now been jailed or detained – usually on corruption charges. The difference with Zhao was that, rather than chasing prestige investments such as property, his aims were in line with one of Beijing’s core industrial policy ambitions – semiconductor self-sufficiency.
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A drive to the cutting edge
The quest to free China from its dependence on foreign-made chips made Zhao one of the most powerful of the country’s new barons. “No one epitomises Beijing’s vision better,” remarked Forbes in 2015. “The goal,” he said, was to use “foreign know-how as a shortcut to building an advanced chip sector for China”. And he proved a master at delivering.
In just two years, Zhao’s state-backed company shot from an obscure role peddling scanners and herbal medicine to become the “champion of Beijing’s chip ambitions”. Zhao drove Unigroup “to the leading edge of China’s semiconductor industry”, says Nikkei Asia, starting off in style with the $1.7bn acquisition of Nasdaq-listed Spreadtrum. Several of the country’s most promising chipmakers evolved from “Tsinghua’s stable”, says the FT – notably Yangtze Memory Technologies, which has more than tripled its production to nearly 5% of the global market since its launch in 2016.
Zhao always dismissed assumptions that he acted on behalf of the Chinese government, describing Tsinghua Unigroup as “a market-oriented company” – a claim endorsed by big-name investors such as Intel, which bought a 20% stake in 2014. Nonetheless, Beijing poured huge funds into the group, which was also well-connected politically. Zhao was particularly close to the former Chinese president Hu Jintao and his son Hu Haifeng, who helped run Tsinghua Holdings.
The last hoorah
When Xi took power in 2013, the cash spigot continued until about 2017, when Unigroup secured $22bn from state investors to fund acquisitions. It was a last hoorah.
As the company’s debt mountain grew, so did its political alienation. Zhao’s standing in Beijing was “clouded by tensions” between Hu and Xi, says the Financial Times. Meanwhile, the Americans had wised up to the threat posed, prompting the failure of multi-billion tilts on tech groups Micron and Western Digital. Tsinghua’s finances began unravelling. In 2020, when it shocked investors by defaulting on a domestic bond, total liabilities were estimated at more than $31bn.
Zhao’s descent, following the forced “restructuring” of his group, was swift, says The Japan Times. But he certainly found his voice – slamming a low-ball $9bn rescue offer by a state-backed fund as “an attempt to commit a crime”. Zhao’s outcry “ignited a public spat” that state censors allowed to flourish. “There’s no reason why I can’t win this case,” he insisted. But in February, he was effectively ousted from the group, says Nikkei Asia. Now he has disappeared from view completely. Whatever his fate, Zhao Weiguo didn’t intend to go quietly.
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