BEIJING, Sep 16 – PRIME. A record number of Chinese semiconductor-related companies have ceased to exist since early 2022 as the Chinese economy weakens due to the effects of the pandemic and growing tensions with the United States, the South China Morning Post reports, citing data from the Qichacha analytics platform.
According to the platform, from January to August 2022, 3,470 companies, including enterprises that were registered with the word “chip” in their name, were deregistered. For comparison, for the whole of 2021, 3420 companies closed their businesses, and for 2020 – 1397 semiconductor manufacturers, the newspaper writes.
According to Zheng Lei, a professor at the Shenzhen Institute of Finance at the Chinese University of Hong Kong, quoted by the South China Morning Post, newcomers to the semiconductor business in China are having a hard time due to high competition and a “harsh environment” in the market. “The semiconductor industry is a capital-intensive industry,” the scientist added.
In recent years, especially against the backdrop of contradictions with the United States, China, as part of its technology and innovation program, has set the goal of gaining independence in the field of semiconductors, increasing the flow of investment in this industry from both the public and private sectors. As the publication recalls, in 2020, 23.1 thousand new semiconductor companies appeared in the country, and in 2021 – 47.4 thousand.
However, the fact that despite all efforts, companies continue to shut down en masse is evidence of the fragility of China’s domestic economy. Weak consumer sentiment fueled by lockdowns and other measures to combat the COVID-19 epidemic and rising tensions between Beijing and Washington are also putting pressure on the semiconductor sector.
Among the participants in the Chinese semiconductor market, pessimism also began to appear. For example, Zhong Lin, the founder of GSR Electronic chip design firm, wrote in a profile public on the WeChat social network that the wave of Chinese semiconductor entrepreneurship “came to an end.” The businessman is convinced that many semiconductor startups will go bankrupt as investors stop investing due to a lack of prospects for making a profit.
More recently, the newspaper states, the semiconductor startup Nurlink did not leave the headlines of the press, as it refused to pay wages to its employees in May and June. But just less than a year ago, the company received another round of financing in the amount of 200 million yuan (28.73 million US dollars).
According to some analysts, the drop in demand growth for consumer electronics, and the resulting curbing of the semiconductor industry, among other things, is due to the severe two-month quarantine in Shanghai this spring.
US attempts to restrain China’s development in this area are not without consequences. The New York Times previously reported that the Biden administration had imposed restrictions on the sale of certain high-tech computer chips to Russia and China. It was noted that the new restrictions apply to high-end models of chips, known as graphics processing units, or GPUs, which are sold by Silicon Valley companies Nvidia and Advanced Micro Devices. The US government, according to the newspaper, said that such products could be used or redirected for military purposes to China or Russia. The Chinese Foreign Ministry accused the United States of technological blockade due to restrictions on the sale of chips.