China Halts Reckless Semiconductor Investments

Over 50 Major Semiconductor Projects Underway as of Last Month
'Accountability' Enforced for Significant Losses or Risks

[Asia Economy Beijing=Special Correspondent Jo Young-shin] China has put the brakes on indiscriminate semiconductor investments by some local governments and companies. As issues regarding investment efficiency arose during the competitive promotion of semiconductor projects, it appears that the direction has shifted toward focusing on nurturing promising companies.

According to Chinese economic media Caixin on the 21st, Meng Wei, spokesperson for the National Development and Reform Commission (NDRC), which oversees China's economic development plans, stated at a press conference the previous day, "Some localities lack awareness of integrated circuit development regulations and blindly proceed with projects," adding, "We will hold accountable those responsible if significant losses or risks occur based on the principle of 'who is responsible'."

Spokesperson Meng criticized, "‘Three no’s’ (no experience, no technology, no personnel) companies are entering the integrated circuit industry, and local governments are blindly supporting projects, leading to risks of substandard and duplicated investments," further stating, "Some projects have even been halted during construction, causing resource waste."

Meng explained that the concentration of the domestic semiconductor industry must be increased in the future, and that they will correct the industrial order based on the principle of 'focus on entities (companies) and regions' and guide to avoid 'malicious competition.'

Amid the US-China conflict, as the United States persistently targets China’s semiconductor sector, which is considered China’s 'Achilles' heel,' China is actively encouraging investment in the semiconductor industry. In this atmosphere, a large-scale semiconductor investment boom is occurring in China.

Caixin reported that as of the end of last year, more than 50 large-scale semiconductor projects were underway across China, including in Jiangsu, Sichuan, Chongqing, Fujian, Guangdong, Shandong, Hunan, and Gansu provinces.

The average scale per project was 30 billion yuan (approximately 5 trillion KRW), with a total scale reaching a staggering 1.7 trillion yuan (290 trillion KRW).

However, there are quite a few projects that have failed to produce proper results and are effectively considered failures. Wuhan Hongxin Semiconductor Manufacturing (HSMC) in Wuhan City, Hubei Province, is cited as a representative semiconductor company that collapsed despite massive investments.

In addition, multi-trillion-won semiconductor projects such as Huai’an Dehuai, Nanjing Dekema, and Chengdu Gexin have been halted midway.

Caixin pointed out, "The semiconductor industry requires concentrated technology and capital, but some localities with weak financial capacity often underestimate the capital input intensity of semiconductor manufacturing projects," adding, "Also, the investment cycle for semiconductor manufacturing is often longer than the tenure of officials, and newly appointed officials sometimes avoid dealing with projects initiated by their predecessors."

The Chinese government has set a plan to raise the domestic semiconductor industry's technology self-sufficiency rate to at least 70% by 2025 and is fully supporting the growth of several semiconductor companies, including SMIC.