Between January 1 and October 27, 2020, no less than 58,000 new companies dedicated to the design or manufacture of integrated circuits were created in China. almost 200 a day. These numbers are impressive on their own, but what’s even more surprising is that many of the entrepreneurs who launched them had no previous experience in the semiconductor space, and this is not exactly an industry where you can improvise on the fly. .
The “pull effect” unleashed by this industry occurred as a result of a chip crisis that in the middle of 2020 worsened with unprecedented aggressiveness. However, this is not all. At that time, the Chinese government was already very clear that the United States, at the head of the Western alliance, was determined to torpedo its ability to develop its semiconductor industry.
This sector is strategic for China (as it is for most developed countries), but it has not been for three years: it has been for at least a decade. In fact, in anticipation of the strong increase in demand that was to come, the Chinese government approved in 2014 a plan to $1.4 trillion (billions of ours, not of the Anglo-Saxons) that intends to encourage the development of its ecosystem of chips. This initiative is too sweet a treat to pass up, but it doesn’t seem to be going as the Chinese Administration had planned. At least not at all.
Internal upheavals rock China’s chip industry
Over the past decade, the Chinese government has doled out many billions of euros between established companies and start-ups that could contribute to the development of its chip industry. This movement is not very different from the steps that Europe has recently taken with its Chip Law, or the United States with its ‘Chips and Science Act’ program, although China’s strategy does not only seek to strengthen its integrated circuit sector; Above all, it aspires to reduce its dependence on technologies that are in the hands of foreign powers.
The companies that have benefited from this economic boost have acquired commitments with the Chinese state
As can be expected, the companies that have benefited from this economic boost have made a series of commitments to the Chinese state that not all have been able to respect. In fact, in 2019 and 2020 seven great companies were born semiconductor manufacturing in China, and none of them produced a single wafer. The development of the technological base and the development of a plant of advanced integrated circuits can hardly be completed in less than four years, but it seems that the Chinese government has very serious suspicions beyond the technical challenges they face. companies in this sector.
And it is that in recent months several executives of some of the largest semiconductor companies in the country have been accused of corruption by the Administration. And, consequently, they have been detained. However, the arrest that is making the most noise is that of Zhao Weiguo, who is the former CEO of Tsinghua Unigroup, one of China’s largest chip and telecommunications companies. This company is one of the ones that have benefited the most from the economic support of the State (between 2018 and 2021 it received more than 8,000 million dollars in financing), for which reason it is being thoroughly audited.
Weiguo was arrested in mid-July 2022, but the Chinese prosecutor’s office has recently formalized its indictment against him for corruption. However, the arrests are not only depriving some big businessmen of their freedom; some of the people appointed by the Government to manage money dedicated to the development of the semiconductor industry, such as Gāo Sōngtāo, who was the vice president of the subsidiary of the Chinese Development Bank, or Lù Jūn, the former president of Sino-Ic Capital.
This is bad news for the Chinese Administration. The Western alliance led by the United States and in which countries with enormous relevance in the chip industry participate, such as the Netherlands, Japan or South Korea, is determined to put the development of semiconductors in China against the ropes. And at this juncture this country cannot allow its own companies to sabotage the strategy it has deployed to become technologically independent from foreign powers. The greatest fundamental challenge that China faces is, beyond preventing the misuse of its resources, to react as quickly as current circumstances demand.
Cover image: ASML
More information: The China Project | BBCNews
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