Mainland China’s semiconductor industry not only failed to surpass Taiwan, but also had a serious wave of bankruptcy due to the “zero-COVID” policy. According to statistics, in the first eight months of this year, up to 3,470 chip manufacturing companies in China closed and the number of bankruptcies reached a new high. Meanwhile, China’s integrated circuit (IC) output in August fell 24.7% year-on-year, also the largest monthly decline on record. This shows that under the U.S.-China technology war, China’s plan to achieve semiconductor self-sufficiency is facing an uphill battle.

The South China Morning Post on September 15 cited statistics from China’s business database “Qichacha” indicating that 3,479 companies including institutions use the Chinese word “chip” in their registered name, brand, or activity – deregistered in the January-August period. This has already exceeded the 3,400 companies deregistered in 2021 and the approximately 1,400 companies in 2020, showing that China’s path to semiconductor autonomy is full of thorns.

Zheng Lei, visiting professor at the Shenzhen Institute of Finance, Chinese University of Hong Kong, said that the semiconductor industry is a capital-intensive industry, and fiercely competitive, making it very difficult for new semiconductor companies.

The South China Morning Post pointed out that, in the past two years, China’s public and private sectors have begun to make large-scale investments to achieve the CCP’s goal of semiconductor self-sufficiency. However, a wave of shutdowns then emerged.

The Epoch Times reported that a string of recent failures of chip companies showed that the stagnant domestic economy, sluggish consumption due to the zero-COVID policy, and rising tensions between the U.S. andChina, has put pressure on the semiconductor industry.

On September 16, the National Bureau of Statistics of China released data showing that China’s monthly semiconductor output in August fell by the most in history.

Chip production fell 24.7% year-on-year to 24.7 billion units, the largest monthly decline since record keeping began in 1997 and the lowest output since October 2020.

It also means that China’s semiconductor industry has narrowed for two consecutive months, with output in July falling 16.6% year-on-year to 27.2 billion units.

In addition, according to GaaTimes, China’s microcomputer output also fell 18.6% to 317.5 billion units in August, the biggest drop since December 2015.

The South China Morning Post reported that the August drop reflects continued pressure on China’s manufacturing sector, with the lockdown of cities under the “zero-COVID” policy plus power shortages due to the heat, disrupting factory production and undermining consumer confidence.

In addition to domestic challenges, the U.S. government has begun to impose more restrictions on the export of technology products to protect the U.S. high-tech advantage.

Last month, the U.S. Department of Commerce notified Nvidia and AMD, of the new restrictions about selling some AI computing chips to China without a license. Experts say this will greatly affect the Chinese Communist Party’s AI ambitions.

Reuters reported that, according to several sources, the Biden administration plans to continue to expand restrictions on AI chip exports to China and impose controls on semiconductor manufacturing tools in October.

The sources also said that U.S. officials have been reaching out to allies to ask them to develop similar policies to ensure that foreign companies do not sell to China technology that U.S. companies ban on export.

Also according to Reuters, Jim Lewis, a technology expert at the Center for Strategic and International Studies said: “The strategy is to choke off China and they have discovered that chips are a choke point. They [China] can’t make this stuff, they can’t make the manufacturing equipment.”

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