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Due to trade friction between the US and China, Chinese semiconductor manufacturer Wuhan Hongxin Semiconductor Manufacturing (HSMC) went bankrupt before starting operations. What was the reason for HSMC’s withdrawal without producing a single semiconductor chip even though a large amount of money was invested?
HSMC started the project in November 2017 as a joint venture between Wuhan municipal authorities and Beijing Guangliang Lantu Technology. Semiconductor is an important strategic material, so it ended a splendid start with a public-private project organized by the government, but HSMC is said to have already had a lot of problems from the beginning.
According to reports, one of the co-founders of the investment company (Cao Shan) had the final education level of graduating from elementary school and the name was also a pseudonym. Another co-founder (Li Xueyen) was also a person who sold alcohol and resells herbal medicines, and said that he had no knowledge of semiconductors.
To fill the lack of know-how, the founders of HSMC hired a renowned semiconductor engineer (Chiang Shangyi) as an executive. However, he took office in 2019 and retired from HSMC in June 2020, and in the same year he became Vice Chairman of SMIC, a large semiconductor foundry in China. He also said in an interview that his time at HSMC was a nightmare.
HSMC couldn’t hold him, but the fact that he was enrolled for a short time was a big weapon. Despite the strong demand from the United States not to sell semiconductor manufacturing equipment to China, Dutch ASML, a leading semiconductor manufacturing equipment company, is said to have had his name value behind selling used exposure equipment to HSMC.
HSMC received great applause in China for its success in purchasing ASML semiconductor equipment. However, at the end of 2019, the financial situation deteriorated, and payments were delayed to the factory builders. According to records in December 2019, HSMC started to run short of payments four months ago, resulting in arrears of 18 million yuan.
As the financial situation worsened, HSMC actually went bankrupt after firing all employees in February 2021. According to the trial data, the Wuhan City government seized 1.2 km 2 of HSMC land and ASML semiconductor manufacturing equipment to recover an estimated 129 billion yuan in debt.
Despite such failures as HSMC, there are no signs of an end to the semiconductor boom in China, with more than 20,000 new semiconductor manufacturers being launched in 2020 alone. In response to this situation, an official from the China National Development and Reform Commission expressed a sense of crisis in October 2020, saying that there is a fear that low-level semiconductor chip manufacturing plants with overlapping manufacturing fields may be scattered. Related information can be found here.
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