Due to sanctions from the U.S., China has been forced to spend vast sums of money developing its independent chip industry in recent years. 

But recently, many chip firms failed to achieve their goal due to poor management, and many officials within these companies were dismissed.

The most recent case is Ding Wenwu, head of China’s biggest chip investment fund, or “Big Fund” for short. This Saturday, he was investigated for “suspected of serious violations of discipline and law.”

The Big Fund that Ding Wenwu headed is Xi Jinping’s bid to raise the country’s self-sufficiency for Integrated Circuit (IC) chips to 40% in 2020 and 70% in 2025.

Since being set up in 2014, The National IC Industry Investment Fund, or “Big Fund,” was a venture to invest heavily in China’s semiconductor industry.

In the first phase of funding in 2014, Big Fund accumulated about $19 billion. In the second funding phase in 2019, it got almost $30 billion. 

Since its setup, Ding Wenwu held the CEO position until this sudden probe.

Ding Wenwu is not the first chip industry official to fall in this latest investigation. According to the Central Commission for Discipline Inspection report, China’s top anti-corruption watchdog, Lu Jun—former chief executive at investment firm Sino IC Capital—was also investigated earlier this month.

Along with other firms, Sino IC Capital conjoined in managing assets under the ‘Big Fund.’

On the same day that Lu Jun was put under probe, Wang Wenzhong, a partner of Shenzhen Hongtai Fund Investment Management Co. Ltd., was also taken away by authorities.

A few days ago, Zhao Weiguo, former chairman of China’s Tsinghua Unigroup Co. Ltd., was also investigated. Tsinghua Unigroup is also an investor in the Big Fund.

China’s Caixin media reported that some leaders of the Big Fund were investigated one after another because they might have allegedly committed wrongful transfer of benefits. 

An industry insider told Caixin that in the early years of the Big Fund, the construction cost of some semiconductor factories was not high. For example, it only initially cost around $30 million, but now it’s up nearly tenfold, to almost $30 billion.

Since the chip independence campaign started in 2014, many parts of China have grasped the chance to join the profit-promising industry. But many blocks stand ahead. 

In 2020, Meng Wei, a spokesman for the National Development and Reform Commission of the Communist Party of China, said there was chaos in China’s semiconductor industry at a press conference. Many companies listed under the “three no’s,” meaning no experience, no technology, and no talent, joined the chip industry. Some local governments blindly pushed plans and repeated construction, leading to stagnant projects, vacant factories, and an overall waste of resources.

According to the statistics of China’s integrated circuit portal “Jiweiwang,” from 2019 to 2020, seven wafer manufacturing enterprises face a broken capital chain.

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