Statistics show that less than 20 percent of China’s circuit chips are produced locally. Under the tension between the United States and China, China has set off a “China chip” craze. The authorities also attach great importance to the support of the semiconductor industry into a large amount of money, and launched a number of preferential policies, but over the past year, there are many large chip projects “unfinished.” A chip project in Guangzhou, said to be under the name of SMIC founder Richard Chang, was also reported to have stalled.
Nansha Economic and Technological Development Zone is located in the southeast of Guangzhou city. Many large enterprises choose to settle here. In March, four property development and semiconductor companies set up Guangdong Haixin Integrated Circuit, with a registered capital of $1bn and land offered by the authorities at preferential prices, with plans to start production within 18 months.
According to the original plan, when the project is completed, it will become a semiconductor center in Guangzhou, producing 500,000 wafers per year, but the production line has not yet been put into production. A number of Chinese financial media quoted Chinese semiconductor industry insiders as saying that the project has been completely suspended recently.
In the face of US sanctions, China has stepped up efforts to develop its own chips. The “China chip” craze swept the country until this July, there were more than 45,000 chip-related enterprises registered in China. In the second quarter, 4,600 new businesses were registered, more than double the number in the same period last year.
Local governments invest blindly and recklessly to please the central government
China’s governments at all levels are facing increasing pressure to attract investment and are no longer simply importing labour-intensive enterprises in favor of high-tech ones, according to CsiRO, a finance scholar. Local governments have their eyes on the chip, but they lack the calculation of a national chess game and the capital reserves.
Commander: “China’s central government did not give sufficient supporting funds, also did not give specific measures for the management of funds, lead to place in the face of such projects, the development of a disorderly mess, even if the place you want to make the central government, they are in the local finance didn’t get good use of money, to produce more and more the image of the project, the image project will generate more low quality, short of international standards, can not meet the requirements of industrial production chip.”
There has been much speculation that smIC founder Richard Chang laid the foundation stone himself, with some even suggesting the project was tailor-made for him. But Chang, known as the godfather of China semiconductor, denied it, saying he was only a “figurehead” not involved in the actual operation.
Commander: “People like him are not easy to find. Since he involved in the project, the main reason why he is front, just because this project became the “abandoned” project, no success, if, he declared he was completely dominated by, or is the direct drivers of the project, the outside world will feel, even if is the father of China’s chip so much, it will hit the outside world confidence in one of China’s top experts.”
Smic may face US sanctions over China’s chip development (image by RADIO Free Asia)
Local governments will not stop investing to get central subsidies
According to Chinese state media, over the past year, a total of 60 billion semiconductor projects, including those in Jiangsu, Sichuan, Hubei, Guizhou and Shaanxi, have been suspended. He Jiangbing, another financial scholar, believes the “China Chip” boom will not cool down, nor will property developers and semiconductor companies.
He JIANGBING: “They can say to the local government, I want to make a chip and meet the requirements above. He could get the construction company to build the house first, cheat it out, and then the subsidies would come in, from top to bottom. He got the subsidies and ran away.”
Wang Zhijun, China’s vice-minister of industry and Information Technology, earlier admitted that the development of the chip industry had seen blind investment and bad balance, which required planning and strengthened supervision. He also mentioned that another problem of China’s chip industry lies in its relatively small scale and lack of competitiveness in the international market. He suggested that China should promote the rapid development of strategic emerging industries through merger and reorganization.
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