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China, the world’s biggest importer of integrated circuits, has sought to reduce its dependence on imports amid concerns over supply disruptions due to geopolitical tensions with the United States. Photo: AFP

China’s semiconductor dream takes a hit as local authority takes over ‘nightmare’ Wuhan factory

  • Wuhan Hongxin Semiconductor Manufacturing Company (HSMC) has been taken over by the Dongxihu district government in central province of Hubei
  • Former chief executive Chiang Shang-yi described his experience with HSMC as a ‘nightmare’ after its plans to build a US$20 billion plant suffered delays

A cash-strapped Chinese semiconductor factory described by its former chief executive as a “nightmare” has been taken over by the Wuhan government in a setback for China’s pursuit of chip autonomy.

According to the latest corporate registration records compiled by Chinese data site Tianyancha, Wuhan Hongxin Semiconductor Manufacturing Company (HSMC) has been taken over by the municipal government in the central Chinese province of Hubei.

This follows months of delays in the construction of its US$20 billion state-of-the-art semiconductor manufacturing plant caused by the coronavirus as well as funding shortages.

The firm is now under the full control of the state assets supervision and administration commission for the Dongxihu district government in Wuhan. Previously, Beijing Guangliang Lantu Technology owned 90 per cent, with the remainder of the funding provided by the Dongxihu district government.

My experience with HSMC was a nightmare, unfortunately! It’s really hard to describe in a few words
Chiang Shang-yi

“My experience with HSMC was a nightmare, unfortunately! It’s really hard to describe in a few words,” said former HSMC chief executive Chiang Shang-yi when contacted by the South China Morning Post via LinkedIn for comment.

Chip scientist Chiang declined to conduct a full interview, having been the public face of HSMC’s campaign to attract investment as part of a trend among Chinese semiconductor firms to employ veteran overseas engineers to boost research and development at home.

Chiang, though, did confirm a letter circulating online this week that said he had resigned from HSMC in June and returned to the United States in July.

He joined the company in 2019 having previously worked for Taiwan Semiconductor Manufacturing Company and China’s Semiconductor Manufacturing International Corporation. Chiang told the Post in August that he was unaware of the extent of HSMC’s financial difficulties until the local government exposed the problem in a July report that was quickly deleted online.

July’s report said that HSMC’s phase one factory, which included its main production facility and a research and development building covering more than 390,000 square metres (4.1 million sq ft), had been partially completed, while construction of its phase two facility had barely started.

A cached version of the company’s now inactive website says it planned to build both 14 and 7 nanometre chip production lines that would be able to produce 30,000 chips per month.

The local government’s plan for HSMC remains unclear, including its development and debt obligations. HSMC still has several ongoing legal cases with contractors who are making claims for numerous delayed payments.

It is the latest setback to hit China’s semiconductor industry after China’s economic planning agency last month asked local governments to take responsibility for any risky chip related projects they had supported.
In May, a US$100 million manufacturing plant set up by US chip giant GlobalFoundries and the Chengdu city government ceased operations after remaining idle for almost two years.

China is seeking to become self-sufficient within the semiconductor industry, but this has led to a surge of poorly planned semiconductor factories, many of which have already been declared bankrupt.

This article appeared in the South China Morning Post print edition as: state takes control of troubled chip maker