Recently, Chinese leader Xi Jinping said that he will “focus on important challenges” to deal with key core technology. Even though there are unfinished projects across various areas in the real estate crisis, the chip industry is still the most important thing.

Semiconductors have become one of the most heated battlegrounds in the long-running war between the U.S. and China. The economy depends strongly on chips right now. Everything runs on them, from ballistic missiles, satellites, fighter jets to IPhones. They are also thought that the current generation of wafer-thin semiconductors would decide the key to getting access to new technologies in the future and how global power would be balanced around the world.

Insiders in the industry point out 5 deadly weaknesses in semiconductors

Zhong Lin started the company China Jinjiang Sanwu Microelectronics Co., Ltd., which makes chips. He recently shared an article on his public account called “Zhong Lin Tanxin.” 

In the essay, he talked about five deadly weaknesses that the Chinese semiconductor industry faces and said that the huge wave of Chinese chip entrepreneurs is also coming to an end.

The first kind of deadly weakness is to the team. 

Zhong Lin said one example of this is the fall of NuoLing Technology. The goal of the new business was to become Qualcomm’s I.C. design center in China. Kong Xiaohua, the founder and a core person of the group, left Nuo Ling Technology in 2020 after completing 200 million yuan financing. He went back to the U.S. to work on development. Nuoling Technology went out of business when Xiaohua—the man who created the main technology for the company—left.

Zhong Lin says that the bankruptcy of Nuo Ling Technology shows that China’s chip industry has a lot of problems. These include spending too much money and planning products that don’t make money but only seem to be in demand.

Blind expansion is the name of the second deadly problem to the industry. Zhong Lin says that for startups, growth is both a dream and a poison.

The other three weaknesses are financial: 

– when an initial public offering (IPO) fails and investors have to use a buyback option, 

– when cash is taken out of the account,

– when the market value is overstated to get more money and better benefits. 

A company does not want to go public just for the sake of doing it, even if it won’t make great profit, and then the market could turn it down.

Because of new U.S. restrictions on Chinese CPU chips, Nvidia and other chip makers can no longer sell powerful GPU processors to Chinese customers. China is having a hard time building up its cloud computing, artificial intelligence, and developing internet sectors because of these problems.

The enterprise information inquiry agency thinks that between 2017 and 2021, respectively more than 460, 710, 1290, 1390, and 3420 licenses for chip-related businesses in China were taken away or canceled. Between January and August 30, 3,470 chip-related businesses in China had their licenses taken away or canceled.

Even though China’s government has tried to develop the chip industry over the past 40 years, Chinese chips are still not as good as chips made in developed countries.

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