The Chip Insider® – China’s Semiconductor industry in failure phase

Summary:

What’s Happening and What’s the Meaning:
China’s Semiconductor industry enters failure phase - Shanghai Wusheng Semiconductor is bankrupt, while 23 others have pulled their IPOs, according to a report in Tom’s Hardware. Almost 11 thousand chip companies were closed in 2023.

This does not signal that China’s semiconductor industry is in trouble. China’s typical economic policy has been not to pick winners, but to fertilize and water a market with far more money than it can absorb. This generates thousands of competitors in the initial phase, few of which ever generate the profitability to survive. Profitability is the market’s weed killer and China uses it well. This happened in smartphones in the last decade. In the end, the market consolidated into a few giants. So China’s failure phase in its economic policy is really a de-weeding of the bad and a consolidation of the good. One proof of this is that the underperformance of China’s chip stocks versus other regions has recently turned to the positive, suggesting the real winners are becoming visible. So it’s not time to do a victory lap, as the competition will get hotter.

Happenings, Comments, Questions & Answers: How Japan Lost its Semiconductor Industry: Role of Keiretsu, ringi-sho, and Decision Cycle Times. Also, comparisons of its failure modes to today’s current chip war with China.

"I've always been more interested in the future than in the past" — Grace Hopper

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