important companies go bankrupt. The rest continue to work

Recently it became known that one of the largest chip developers in China is leaving the market. Over the years of its operation, the company has received hundreds of patents and has become one of the drivers for the development of the industry. We are talking about Huaxia Chip, which encountered insurmountable difficulties that led to its closure. Nevertheless, the rest are working, and not bad.

What's happened?

The organization in question very large — it owns a whole network of research centers throughout China. Huaxia Chip's headquarters is located in Beijing. The problem did not arise suddenly – the company stopped actively developing after 2018, i.e. even before the onset of the coronavirus pandemic.

Nevertheless, she presented important developments at industry exhibitions and continued to create chips for various areas of industry. According to experts, at first the problems were not very big, but the onset of the pandemic intensified and expanded them, which led to a gradual extinction.

There were two more reasons: sanctions from the United States, as well as lawsuits with ex-partners and competitors, so the company had to fight on several fronts at once.

It is surprising that even in the most difficult period of its work, Huaxia Chip managed to participate in cutting-edge projects, as well as receive prizes in industry competitions. According to market players, the most important asset of Huaxia Chip is not the chips themselves, but patents, of which the organization has many.

Technologies created by the company's employees are used in the design and production of chips, including central processing units, graphics chips and accelerators for artificial intelligence. They are used in robotics, cloud computing, IoT and other technological areas.

As a result, Huaxia Chip managed to enter the top 5 most successful Chinese companies in the chip development industry. She was also shortlisted for the 2020 China IC Design Achievement Award.

But, unfortunately, she was unable to cope with a large number of problems, which led to the current result.

What else?

According to DigiTimes, in just five years, over 20 thousand organizations that were related to the production of chips left the industry. And about 10 thousand closed in 2023, which indicates an increase in the number of negative factors. All this affects only relatively small manufacturers; large companies cope.

By the way, there is another problem – growing competition. Despite the fact that the electronics industry is very vast, tens of thousands of companies cannot do something unique. The interests of many of them intersect, which means the intensity of competition is growing. As a result, more successful companies are gradually pushing the “losers” out of the industry. This has always been the case, but in China this process is much more intense than anywhere else.

At the same time, even the winners cannot boast of significant profits or even income, which is critical for business. Thus, according to statistics from China itself, the annual revenue of most companies does not exceed $1.4 million, which is very little for the industry.

In order for the company to continue not only to operate, but also to scale the business, investments are required. But there are not many of them, and even government support cannot be a panacea. Simply because, despite the huge amount of government investment, there are much more companies that need help. And not everyone will receive it. The volume of private investment has decreased significantly due to the already mentioned sanctions. US and European businesses have left the industry, not completely, but for the most part yes.

As a result, large manufacturers such as YMTC and Huawei received investment from the state and were able to build new supply chains and purchase the necessary tools (lithography machines, etc.). But many small companies have not coped with all these problems. Accordingly, the market of the Chinese electronics industry now contains mainly large and medium-sized players, and there are fewer and fewer small ones. But, as we see, big business also from time to time finds itself among the losers of this technological race.

Not everything is so bad, the electronics industry is actively developing

Despite all these problems, China continues to increase the volume of integrated circuits produced. China manages to do this even under tough sanctions from the US side. The results are known – for example, in March 2023, semiconductor production increased by 28.4%. In absolute terms, this is 36.2 billion different electronic components. In the first quarter of 2024, almost 100 billion chips were produced, which is 40% more than in the last quarter of 2023.

According to experts from TrendForce, by 2027, China's share in global chip production will reach 39%. First of all, we are talking about the supply of so-called “mature” microcircuits, i.e. those produced using the technologies of previous years. These are 28-nm and less modern technological processes, as previously announced by the Center for Strategic and International Studies (a think tank based in Washington).