The US export controls on Chinese semiconductors have entirely ruined the chip industry, sparking mass bankruptcy in which thousands of companies shut down their business.
As many as 5,746 Chinese chip companies were deregistered in 2022, a 68% increase from 3,420 in the previous year, Chinese media Titanium Media App reported on February 16. That is about 15 chip companies every day, on average.
China’s leading flash memory manufacturer, Yangtze Memory, has reduced its production volume and planned to lay off 10% of employees two months after being included on Washington’s “entity list” of export control in December.
Its plan for a new factory in Wuhan has also been suspended. The reasons for the closures include inexperienced operators who joined the semiconductor business in a rush and, once finding it unprofitable, closed their doors, according to a report published by Chip Language, a website that focuses on the semiconductor industry in China, on February 17.
The US export controls on Chinese semiconductors also significantly affected Chinese firms’ performance and confidence.
Experts say the reason for the large-scale bankruptcy of Chinese chip companies is the US-China technology war.
The US’ various export controls on China’s semiconductors continued to tighten last year. Even if Chinese companies have subsidies from the government, their overall operations will be shut down.
The US alleges that China has engaged in technology theft for many years.
Last year in August, President Joe Biden officially signed the CHIPS and Science Act 2022.
In addition to promoting the development of the domestic semiconductor industry, it stipulates that the chip companies that have received subsidies from the US government are not allowed to invest in the semiconductor industry in China.
In October 2022, the US Department of Commerce announced a series of chip export control measures, including that US companies are not allowed to export advanced chips and related manufacturing equipment to China unless they obtain government permission; chips manufactured in other countries using US technology are also subject to this regulation. In addition, American technical personnel are prohibited from developing and producing advanced chips in China.
The relationship between the United States and China is still relatively tense, and the US’ control over China’s semiconductors will continue to increase.
Other countries are also facing the problem of choosing between the two countries.
If Chinese chip companies want to find some resources overseas, whether it is cooperation in talent or technology, they will face difficulties. Because all the critical chip technologies are outside the mainland, China still needs to establish its own industrial system to produce them.
The production process of the entire semiconductor industry is divided into many stages, each stage has a different country with a maximum advantage, but only US companies can lead the whole process.
Experts say there is no way for China to break through this situation.
The second reason for the mass bankruptcies in China’s chip industry is the downturn of China’s economy.
Last year, China continued implementing “Zero-COVID” controls, including lockdowns. In addition to affecting the production side, it significantly negatively affected the demand side, including PC consumer electronics and smartphones.
Last year’s overall economic performance was so poor that it would make it difficult for China’s chip industry to recover.
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