China’s Tsinghua Unigroup revealed plans to invest CNY300 billion ($47 billion) over the next five years to create the world’s third-largest chipmaker and is in talks with a US chip firm, Reuters reported.

State-run Tsinghua Unigroup chairman Zhao Weiguo told Reuters that the deal could be finalised as early as the end of this month. But he said that it was unlikely to take a majority stake in the US firm because it was too “sensitive” for the US government.

Reuters noted that, currently, Qualcomm holds the number three position in the global chip rankings, behind Samsung and market leader Intel, which has a market capitalisation of $151.5 billion.

The Chinese firm also halted plans to invest in Taiwanese tech firms due to regulatory hurdles. Earlier it had agreed to take a stake in Powertech Technology and said it was interested in more cross-strait deals.

In August, it made an informal $23 billion takeover offer for US giant Micron Technology that was rejected out-of-hand by the Idaho-based chipmaker amid concerns a deal might endanger national security.

The world’s largest chipmaker Intel more than a year ago announced it was investing up to $1.5 billion for a 20 per cent stake in Tsinghua Unigroup, which controls Chinese mobile silicon players Spreadtrum Communications and RDA Microelectronics.

The output value of China’s semiconductor industry was about $12.5 billion in 2014, of which $5 billion came from IC (integrated circuit) design, $3.7 billion from IC fabrication and $3.8 billion from IC packaging and testing, according to China Semiconductor Industry Association.

Last year China firms produced about 102 billion ICs but imported 285 billion ICs, or 74 per cent of the ICs consumed.

Despite huge investments in China’s semiconductor industry, production is making minimal impact on meeting the growing demand, Robert Castellano, from The Information Network, wrote on SeekingAlpha. China’s IC production increased just 12 per cent last year as IC demand for consumer and mobile devices expanded 20 per cent.