Beijing [China], February 13 (ANI): China has the ambition to create a "national champion" in the semiconductor industry, however, this desire has led to a series of reckless investments in poorly planned projects, many of which went bankrupt within a couple of years after swiping multimillion-dollar investments from government organs, according to a report in Nikkei Asia.
The local governments in China have been eager to support private enterprises that make chips even those with dubious credentials, the report said.
Chinese National Development Reform Commission (NDRC) has also admitted the problem and has stepped in to work with other government departments and put in place tighter supervision over semiconductor projects, as Beijing continues its push to boost domestic chip development and manufacturing.
During a press briefing held in October 2020, NDRC spokeswoman Meng Wei said that some companies "with insufficient knowledge of integrated circuit development have blindly entered into projects."
"The semiconductor manufacturing industry is extremely complicated, with many stakeholders. It is difficult to pinpoint responsibility and hold anyone accountable when something goes wrong during the process. Besides, when actual fraud is found, local governments will swallow their pride, absorb the losses and stop talking about it," a veteran investor based in the Yangtze River Delta industrial region told 36Kr, a Chinese news and data website that tracks startups.
To date, the most high-profile case involves Wuhan semiconductor-manufacturing-co">Hongxin Semiconductor Manufacturing Co. (HSMC), whose project received immense support from the government of Wuhan's Dongxihu district, according to Nikkei Asia.
On July 30, 2020, local officials announced that HSMC's project could not continue due to irreconcilable gaps in funding.
The authorities have since taken over the botched project, with no clear plans for the next step. The status of the billions of yuan of public money that were sunk into HSMC remains unaddressed.
In November last year, the company was taken over by the municipal government in the central Chinese province of Hubei.
This follows months of delays in the construction of its USD20 billion state-of-the-art semiconductor manufacturing plant caused by the coronavirus as well as funding shortages.
The firm is now under the full control of the state assets supervision and administration commission for the Dongxihu district government in Wuhan.
China is seeking to become self-sufficient within the semiconductor industry, but this has led to a surge of poorly planned semiconductor factories, many of which have already been declared bankrupt.
Despite the financial quagmire rooted in HSMC, the semiconductor industry remains a beacon for China's next industrial revolution.
Semiconductor Manufacturing International Corp's (SMIC) co-founder, Xie Zhifeng once said: "The US, Japan and South Korea have reached the peak of their chipmaking development. The future market is in China, and the talents are coming home. The time for a paradigm shift in China's semiconductor industry has arrived."
The only catch is there are no shortcuts, as some stakeholders in the industry have learned the hard way. (ANI)