China’s Semiconductor Push Falters As Major Chipmakers go Bankrupt – Tekedia

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China’s ambitious drive for semiconductor self-sufficiency, marked by substantial government investment and aggressive growth targets, is faltering amid a surge of unfinished projects and bankruptcies.
Despite its aspirations, China continues to lag behind the United States in semiconductor technology, compounded by U.S. sanctions and internal industry struggles.
Recent insolvencies, such as the high-profile bankruptcy of Shanghai Wusheng Semiconductor, underscore the sector’s instability. Shanghai Wusheng, a producer of OLED display drivers, microcontrollers, and CMOS image sensors, declared bankruptcy due to financial difficulties despite an initial $2.48 billion investment in 2021.
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This collapse reflects a broader trend of financial instability affecting smaller companies within China’s semiconductor industry, as reported by the China Times. The market has seen 23 semiconductor companies withdraw their IPO applications since last year, indicating a growing wariness among investors.
The wave of unfinished projects and corporate closures started in 2020. Between 2021 and 2022, over 10,000 Chinese chip-related companies ceased operations. In 2023, a record 10,900 semiconductor-related companies deregistered, nearly doubling the previous year’s closures.
The unfinished projects include significant investments, such as a $3 billion integrated device manufacturing (IDM) project in Nanjing, initiated in 2020 but stalled by the end of the year. The project was restructured and rebranded as Xinyue Polar Core Semiconductor in 2021, which saw its registered capital significantly reduced, indicating persistent financial troubles.
China’s initial push to dominate the semiconductor industry began in 2014, supported by hefty government subsidies. This led to the registration of 50,000 semiconductor-related companies in 2020 alone. However, several high-profile projects, like the GlobalFoundries and Chengdu collaboration and the Wuhan Hongxin project, failed, highlighting systemic issues within the industry. The withdrawal of 23 IPO applications since early 2023 further reflects investor caution.
Looking forward, tightening IPO policies in 2024 are expected to impose stricter standards, making it harder for underqualified semiconductor firms to raise capital. Experts predict this will result in more companies exiting the market due to financial challenges and difficulties in securing investment.
Acknowledging the grim outlook, Zhang Ping’an, CEO of Huawei’s Cloud Services, expressed rare public concern about China’s semiconductor capabilities at the Mobile Computility Network Conference. Zhang highlighted the severe impact of U.S. sanctions, particularly on China’s ability to acquire advanced 3.5nm chips, which are critical for cutting-edge technologies.
“Under U.S. sanctions, China has no way to secure these products,” he noted, bringing attention to Taiwan’s TSMC, which continues to supply these advanced semiconductors unaffected by the sanctions.
Despite a $47.5 billion fund announced by the Chinese government in May to boost its semiconductor industry, challenges remain. Huawei’s success in mass-producing 7nm chips without extreme ultraviolet (EUV) technology was seen as a breakthrough. However, Zhang noted the significant hurdles in advancing to 3.5nm technology, which requires EUV equipment restricted by U.S. export controls.
To cope with these restrictions, Chinese manufacturers are exploring workarounds and gray market solutions. For instance, DRAM maker CXMT is preparing to mass-produce 18.5nm DRAM, circumventing the sub-18nm equipment restricted by U.S. sanctions. This adaptation illustrates China’s strategy to maximize the potential of available technologies while navigating around export controls.
The market implications are substantial. Research firm TrendForce predicts that if China remains unable to produce more advanced semiconductors, it will likely focus on increasing its share in the legacy semiconductor market, with an expected rise from 29% in 2023 to 33% by 2027. This shift may also affect Chinese electric vehicle (EV) makers, who face challenges expanding into international markets due to similar restrictions and high tariffs imposed by the U.S.
Zhang’s concerns resonate with comments from former Google CEO Eric Schmidt, who highlighted the U.S.’s significant lead over China in the AI race.
“In the case of artificial intelligence, we are well ahead, two or three years probably of China, which in my world is an eternity,” Schmidt stated. He attributed this advantage to chip shortages in China and the lack of access to advanced AI chips due to U.S. sanctions.
The outlook for China’s semiconductor industry, once a symbol of its technological ambition, is now clouded by substantial obstacles. The sustained U.S. pressure has forced a reassessment of China’s capabilities, shifting focus towards optimizing existing technologies and exploring alternative solutions.






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