Lawrence Person's BattleSwarm Blog 5/27/2024
Madness is doing the same thing over and expecting different results, and China is throwing money at semiconductors again.
China has launched a massive $47 billion fund, the largest in its history, to bolster its semiconductor industry and establish a local supply chain. This fund, equivalent to 344 billion yuan, is the third phase initiated by the China Integrated Circuit Industry Investment Fund [also known as the National Integrated Circuit Industry investment Fund Company (ICF), or just “Big Fund.”-LP]. It’s worth noting that this amount is twice the total funds raised in the previous phases in 2014 and 2019.
Do you remember the last time I covered where the money went to in those previous phases? The money went to companies like Wuhan Hongxin Semiconductor Manufacturing Co. Result? “Hongxin’s unfinished plant in the port city of Wuhan now stands abandoned. Its founders have vanished, despite owing contractors and investors billions of yuan.”
Or maybe Tsinghua Unigroup. Result? The arrested a whole lot of executives, a lot of money disappeared into various pockets, and “Tsinghua Unigroup abandoned its plan to build DRAM memory chip manufacturing plants in Chongqing and Chengdu in southwest China earlier this year.”
As I wrote before, China’s semiconductor industry is shell games all the way down.
At lot of times, loans and investments are siphoned through four or five different entities from the purposes for which they were originally obtained. Everyone’s trying to get rich, and they hope to survive on smoke and mirrors long enough to get profitable. Imagine if Kleiner Perkins invested $25 million in a software startup, only to find that money was spent on a noodle shop, a used car dealership and a golf club manufacturer.
Sometimes it works. You can build a company on margin, get profitable quickly, and be paying off investors and contractors before anyone realizes how shaky the entire enterprise is.
But you can’t do that with semiconductor manufacturing. The startup costs are simply too high, easily in the billions. Very, very few companies can afford to be in a game that expensive. China’s two biggest semiconductor manufacturing success stories, SMIC and Tsinghua Unigroup, all have have CCP direct government investment.
More:
https://www.battleswarmblog.com/?p=58215
