According to the South China Morning Post (SCMP), a record number of China’s chip firms have been put out of business this year. 

The news outlet cited data from the business database platform Qichacha, saying 3,470 chip firms in China have been deregistered for the first eight months of this year.

The above figure exceeds 3,420 firms in the semiconductor sector that closed business in 2021. In 2020 the number was 1,397 firms.  

As part of Beijing’s effort toward chip self-sufficiency, the number of semiconductor-related businesses has surged in the past couple of years. 

China had 47,400 new businesses in the semiconductor sector in 2021 while posting 23,100 firms in 2020.

Bloomberg reported in June that Chinese firms’ imports for chip – manufacturing equipment increased 58% in 2021, becoming the biggest market for those products for the second year in a row.

However, Zhong Lin, founder of chip design firm GSR Electronics, said to SCMP that the tide of Chinese chip entrepreneurship has “come to an end” due to a lack of profit prospects and funding gradually being depleted.

SCMP took chip design start-up Nurlink as an example. The firm recently has become a spotlight for failing to pay wages for its employees in May and June. Less than a year ago, Nurlink finished a financing round of 200 million yuan ($28.73 million).

In recent years, China has embarked aggressively on its ambition to achieve global chip dominance as a part of its Made in China 2025 plan to compete with the U.S.

The National Integrated Circuit Industry Investment Fund (CICF) was founded in 2014 as part of China’s major effort to boost its chip industry. The fund received an initial $22 billion investment an additional $33 billion investment in 2019.

However, China’s ambition took a hard hit when eight Chinese officials in the semiconductor industry were fired and placed under investigation in July. Most were high-profile figures in a Chinese chip monitoring agency and the CICF.

Earlier this month, the U.S. government ordered California-based chip designer Nvidia to stop exporting two top computing chips for artificial intelligence to China as Washington attempts to restrict its cutting-edge technology to its rival.

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