Chinese state-backed technology conglomerate Tsinghua Unigroup Ltd is buying a 25 percent stake in Powertech Technology Inc for $600 million, becoming the largest shareholder in the Taiwanese chip packaging and testing company.

The alliance, announced on Friday by both companies, is likely to help bolster the development of China’s fledgling chip industry and comes after the Chinese tech group recently hired a veteran Taiwanese semiconductor executive.

“We believe Powertech, with its ability in the assembly and testing industry, will be an important member in the semiconductor industry supply chain of Taiwan and China. We expect to achieve a win-win together following our cooperation,” said Tsinghua Unigroup chairman Zhao Weiguo, in a company statement.

Powertech said that the move will help expand its global market share, including in China, as a chip assembly and tester, and allow it to vertically integrate with the semiconductor businesses of Tsinghua Unigroup.

Tsinghua Unigroup will pay T$75 ($2.31) a share in a private placement of new Powertech shares to gain a 25 percent ownership of the company. The deal still needs to be approved by Powertech shareholders and relevant regulatory authorities.

Powertech’s main operations are in Taiwan and it employs more than 11,000 on the island, which is around 90 percent of the company’s total staffing, Powertech said.

It said it plans to use the funds from the private placement to expand its capacity of advanced assembly and testing services in Taiwan and develop advanced processes for production, as well as recruit staff.

Earlier this month, Tsinghua Unigroup hired Charles Kau, the chief of Micron Technology Inc’s Taiwanese joint venture, as its global executive vice president, a person familiar with the matter told Reuters.

Kau’s hiring came about three months after Tsinghua made an informal $23 billion takeover offer for Micron that was rejected out-of-hand by the Idaho-based company’s leadership, although the Chinese side has not given up on a deal, sources have said.

($1 = 32.4620 Taiwan dollars)

(Reporting by J.R. Wu and Yimou Lee; Editing by Muralikumar Anantharaman)

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