News JVTech China receives a monumental blow: its chip gurus are struck down by the anti-corruption authority
Published on 03/22/2023 at 18:38
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China continues the hard blows on the chip industry. The small world of semiconductors, relatively ignored by the general public, nevertheless represents a key sector: all of high tech depends on it. Today, China must face a dark affair of corruption in addition to the assaults of its American enemy.
China bets big on chip industry
China has made the production of integrated circuits one of its main industrial priorities. Over the first 10 months of 2020, around 60,000 companies linked to the design or manufacture of chips were created in the Middle Kingdom. It’s monstrous. What is surprising is that most entrepreneurs who entered the semiconductor industry had no previous experience in this field.
Why such a “pull effect” for this particular industry? Quite simply because of the great period of shortage of semiconductors which hit the world for 2 long years. To cope with this, new players were needed on the market.
The recent flea crisis of which we have just spoken has accentuated the political tensions between the two great industrial forces that are China and the United States. In 2020, the Chinese government denounced the actions of the United States, which already seemed determined to torpedo the domination of its great rival.
The chip sector has been extremely strategic for China for about ten years. The country was one of the few in the world to have perfectly anticipated the explosion in global demand (with the development of electric cars, for example). As early as 2014, Chinese leaders approved a current 1.4 trillion-euro plan to develop the country’s chip industry. In 2023, this plan goes off the rails.
Chinese semiconductors in turmoil: a big case of corruption
The Chinese billions have been dispatched between the tens of thousands of young start-ups and the few big companies already well established in the chip industry. The most expert among you will tell us that Europe with its Chip Law and the United States with its Chips and Science Act are following more or less the same path. However, there is a notable difference with the Chinese initiative : the Eastern power is not only seeking to strengthen itself, it is also seeking to reduce its dependence vis-à-vis the rest of the world.
You suspect it, a company that receives state aid must make a series of commitments vis-à-vis the latter. Small problem: most of the companies that received this boost were not able to honor their commitments! All in all, 7 major semiconductor manufacturing companies were born in China in 2019 and 2020… and none of them produced a single wafer. Admittedly, developing a factory of advanced technologies like advanced integrated circuits takes time, but even taking these technical challenges into account, the Chinese government seems to have very serious suspicions. : everything indicates that large sums of money would indeed have been embezzled.
For example, the executives of some of China’s biggest semiconductor companies have been accused of corruption. Today, these big bosses have all been placed behind bars.
An arrest dating back to July 2022 has been talked about more than all the others: that of Zhao Weiguo, former CEO of Tsinghua Unigroup, one of China’s largest chip and telecom companies. Between 2018 and 2021, Tsinghua Unigroup got flushed out by the Chinese administration. We are talking about… more than 8 billion euros embezzled. Zhao Weiguo is now officially charged with corruption.
The big wave of arrests that has swept through the Chinese chip industry is not just about corporate executives. The government has appointed people, including bankers, to manage grant money. As you can imagine: these people also had the right to a passage before the judges.
In short, between these dark affairs and the repeated attacks of the Western alliance formed around the USA, the Chinese chip industry is in bad shape. We were talking to you recently about the agreements concluded between many countries to dynamite the Chinese semiconductor market. At the end of March 2023, almost all the giants of the sector are united against China. Japan, South Korea, Korea, United States, Netherlands, Germany… in the face of all these beautiful people, China cannot allow its companies to sabotage the national strategy. The Middle Kingdom will have to react quickly or the battle over this key economic sector will be definitively lost.
