In 2020, Chinese companies produced just 5.9% of the semiconductors used in China, with foreign-owned companies in China producing an additional 10%, according to a report by market research firm IC Insights.
Despite the massive investment and with the above couple of indicators, the United States-China Economic and Security Review Commission (USCC) highlighted that the Chinese Communist Party has not achieved its ambition of creating a self-sufficient domestic manufacturing base to meet China’s technological needs.
Then the USCC refers that the Made in China 2025 Plan, published in 2015, urged Chinese companies to produce 40% of the semiconductors used in China by 2020 and 70% by 2025.
Also the Chinese Communist Party’s efforts to foster technological self-sufficiency have highlighted the inefficiency of China’s state-led investment approach, with some 50,000 Chinese startups registering as «semiconductor-related businesses» in 2020, almost quadrupled the number of registrants in 2015.
To the USCC, these registrants included companies that had highly questionable connections to semiconductors, including restaurants and real estate developers.
Chinese companies
In October 2020, a spokeswoman for the National Development and Reform Committee said that some companies «with insufficient knowledge of integrated circuit development have blindly entered projects.»
The case of Wuhan Hongxin Semiconductor Manufacturing, a company founded in 2017, is a recent illustration of this problem.
In March 2021, the Chinese technology company 36Kr reported that Wuhan Hongxin Semiconductor Manufacturing was a fraudulent company whose founder had no experience in semiconductors.
The company reportedly received approximately $1.9 billion (RMB 12.4 billion) in government investments, bank loans and contract deposits before failing.
Meanwhile, a global shortage of semiconductors used in automobiles has also contributed to reducing vehicle production in China.
According to the China Association of Automobile Manufacturers, passenger vehicle production decreased 18.7% year-on-year in August 2021, “mainly affected by insufficient chip supply”, although car sales remained higher in 2021 than in the same period of the previous year.
