In the face of the chip supply panic caused by the chaos in the chip industry, the Chinese authorities said, to rectify the current disorderly situation across the country to engage in chip fast, clearing a large number of huge rotten projects.
China’s National Development and Reform Commission spokesman Meng Wei said at a regular press conference on Tuesday (October 20), some inexperienced, no technology, no talent, “three no” enterprises engaged in the chip industry, blindly on the project, the risk of low-level redundant construction is increasingly apparent.
In the first nine months of this year, there have been more than 13,000 Chinese companies registered as semiconductor companies, twice the monthly average of last year, according to a report in the Financial Times. And many of the new chipmakers are inexperienced in semiconductors, ranging from seafood operators (such as Dalian Chenxin Network Technology) to auto parts dealers (such as Shanghai Xinpeng Auto Parts).
China’s State Council in 2014 since the introduction of the National Integrated Circuit Industry Development Promotion Outline, including Shanghai, Shenzhen, Nanjing, Wuhan, Hefei, Chengdu, Guiyang, a number of cities are heavily involved in the layout of the chip industry, in order to compete for national resources.
China is the world’s largest importer of chips. Deteriorating U.S.-China relations have led to concerns about chip supply disruptions in the Chinese market, especially after the U.S. imposed new sanctions on China.
China is a major chip importer, said Wei Shaojun, vice chairman of the China Semiconductor Industry Association, at the World Semiconductor Conference on August 26. He said that China’s chip imports after 2013 exceeded $200 billion. 2018, the figure exceeded $300 billion, and will remain at that level in 2019. He believes that if there are no anomalies in 2020, China’s chip imports may not fall below $300 billion.
The United States is the world’s largest supplier of chips, its share of chip exports accounted for about 52% of the global market share. Most of China’s imports of chips come from the United States.
WinSoul Capital, a Shanghai-based private equity firm, estimates that total investment in China’s semiconductor industry in the first seven months of this year was 60 billion yuan ($9 billion), more than double the amount invested in the same period last year.
This huge increase in investment has not been matched by a corresponding increase in returns, and the growing risk of an investment bubble is causing widespread concern.
Wuhan Hongxin Semiconductor Manufacturing Company’s new factory in Wuhan has been stalled this year due to disruptions in investment, creating a huge mess. It was supposed to be a key part of a $20 billion investment plan that was expected to help transform Wuhan into a semiconductor manufacturing hub.
Earlier this year, a $100 million manufacturing plant built by U.S. chip maker GlobalFoundries and the Chengdu municipal government was shut down after nearly two years of inactivity.
In July, Decode (Nanjing) Semiconductor Technology Co. declared bankruptcy after its roughly $3 billion semiconductor project in Nanjing stalled for about two years.
Gu Wenjun, chief analyst at Shanghai-based semiconductor research firm ICWISE, was quoted in the South China Morning Post. He argues that the government needs to encourage more private investment, rather than relying solely on the state.
Meng Wei, a spokesman for China’s National Development and Reform Commission, said that for the current chaos in the industry, it is necessary to strengthen planning and layout to guide the industry to strengthen self-discipline and avoid vicious competition.
Analysts point out that China has always prided itself on its institutional advantage of concentrating its efforts on major issues. But this national system, like everything else, has its pros and cons. It can be mobilized for good, but it can also be a breeding ground for great disasters. In the early 1960s, the Chinese Communist Party launched the nationwide “Three Red Flags” campaign, which resulted in a nationwide famine that led to the starvation deaths of more than 40 million people.
Many professionals say that chip manufacturing is an extremely complex and demanding process, smashing money is not smashed out. The current chaos in China’s chip industry is nothing more than a normal phenomenon in which governments across the country are trying to reap national investment by setting up projects. The emergence of huge waste is also one of the inherent characteristics of this national system.
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