Statistics show 5,746 Chinese chip companies closed down in 2022 and more than 3,400 in 2021. This has given rise to a pessimistic view of the development of China’s chip industry.

Still, this may just be the chip industry seeing hope. Under the elimination of the fittest, the strongest will run out of it and grow the Chinese chip industry.

Since establishing China’s integrated circuit industry fund in 2014, China has given birth to more than 10,000 chip companies.

There is no shortage of subsidies among these chip companies to go to chip companies. They are not sincere about the chip. In fact, in this case, they have become the black sheep of the Chinese chip industry.

The Problem of Chip R&D

Chip research and development is a high investment and high return on technology. Industry sources pointed out that the license fee for access to ARM is tens of millions of yuan.

Then the flow of chips is often tens of millions, which shows that the research and development of chips requires a high level of sustained investment. Not a startup chip companies pull up dozens of hundreds of technical engineers who will be able to develop the chip.

Chip technology research and development is also a difficult technology. Some think the chip is to obtain the ARM license and then take the ARM public version of the core stack to develop a chip.

However, domestic cell phone companies gathered several chip engineers, and spent nearly 100 million yuan, eventually chip or failed; Apple is such a powerful enterprise the development of cell phone chip baseband for many years has not been successful, which shows that chip research and development is not such an easy thing.

In this case, the birth of these 10,000 chip companies is to calculate the problem of good and bad. After nearly 10 years of development, the chip companies that can develop now should have their competitiveness, and the chip companies’ lack of core technology advantages are eliminated reasonably. The 5,700 chip companies that closed down should have a considerable number of such chip companies that are not competitive.

Similar Industry Phenomena

The new energy vehicle industry has a similar phenomenon. China’s new energy vehicle subsidies began in 2015. Gluttonous new energy vehicle subsidies, and the early emergence of a large number of new energy vehicle companies, however, many of them are muddy water to fish for enterprises.

In those years, China produced many new energy car companies. Still, the cars produced by these new energy car companies lacked competitiveness and were not purchased by consumers, and most of them were reduced to garbage in car graveyards.

BYD is now the world’s largest new energy vehicle company, beating Tesla, the benchmark for new energy vehicles.

Compared with new energy vehicles, the chip industry started earlier, with the launch of subsidies also a year earlier, to start the elimination race. These muddy water chip companies have been considered lucky. They at least enjoy subsidies more than those who have long fallen to new energy vehicle companies also two or three years.

After nearly a decade of development, China’s chip industry has also made great achievements, with chip production capacity breakthrough daily output of 1 billion, breaking the gap between storage chips, RF chips, analog chips, GPU chips, etc., constantly replacing the U.S. chip, resulting in the U.S. chip from 2022 to face high inventory.

Chip prices plunged ninety percent, proving that China’s chips do have the ability to replace the U.S. chip. These have grown up chip companies to eliminate those who fish in troubled waters of the chip business has become inevitable.

The fall of this batch of chip companies helps form a peaceful development of China’s chip industry. Competitive chip companies will get more development opportunities, and the elimination of chip companies fall can give up more resources to support these competitive chip companies to accelerate the development of China’s chips.

Why are so many chip companies written off?

1. into the field to come together the exit of enterprises. In itself, these companies are to earn more benefits. The results found that the industry is too burned, and it is not easy to make quick money, so they choose to exit.

2. The chip industry has entered a period of decline. According to the recent performance reports published by the relevant chip upstream and downstream enterprises, the entire chip industry began to ebb and performance decline from the second half of last year. In such a context, venture capitalists are reluctant to invest more money in startups.

3. The step-by-step approach of U.S. sanctions. With the increasing number of U.S. sanctions, many newly registered companies have lost confidence in the industry trend and chosen to withdraw.

Conclusion

In conclusion, China’s chip industry is facing an uphill battle to make a comeback after 5,700 closures last year. But there are reasons to remain hopeful that this enormous impact on the global semiconductor supply chain won’t be long-lasting.

Innovations in technology and increased investment in resources can help this industry rebound and stay competitive. With some improved measures and support from the government, the future of China’s chip industry looks brighter than ever.