Major Chinese semiconductor company goes bankrupt — 23 others recently withdrew IPO applications

Taiwan's media warns about the resurgence of failed semiconductor projects in China.

China's semiconductor industry is facing a resurgence of unfinished projects as smaller companies go bankrupt, reports the China Times. Recent insolvencies, such as that of Shanghai Wusheng Semiconductor, have raised concerns about widespread closures. Additionally, the market has seen 23 semiconductor companies withdraw their IPO applications since last year, which reflects growing investor caution.

The trend of unfinished semiconductor projects initially started in 2020 and over 10,000 of Chinese chip-related companies had to close their doors in 2021 – 2022. A record-breaking 10,900 semiconductor-related companies deregistered in 2023, a significant increase from the 5,746 companies that closed down in 2022.

For example, Shanghai Wusheng Semiconductor, a maker of OLED display drivers, microcontrollers, and CMOS image sensors, founded in 2021 with an investment of around $2.48 billion, recently went bankrupt due to financial difficulties. The bankruptcy of Shanghai Wusheng Semiconductor is not an isolated issue and is tied to the earlier financial troubles of Wu Sheng Electronics Technology Group and Nanjing Wusheng Semiconductor Technology (later renamed Nanjingxin Charming Extreme Semiconductor Technology), reports Yibeiic.

In July 2020, a $3 billion IDM project was initiated in Nanjing, targeting a monthly output of 40,000 300-mm wafers and an annual value of over ¥6 billion ($827 million), but saw no progress. By the end of 2020, Nanjing Wusheng Semiconductor underwent a shareholder restructuring, rebranding as Xinyue Polar Core Semiconductor in 2021, and significantly reducing its registered capital. In April 2021, Shanghai Wusheng Semiconductor announced an ¥18 billion yuan ($2.48 billion) investment plan to complete within five years. However, Wu Sheng Electronics filed for bankruptcy in 2023, and by now Shanghai Wusheng Semiconductor has also become insolvent. This bankruptcy has sparked fears of a new wave of industry closures similar to those seen in 2020.

China's push to develop its semiconductor industry began in 2014, driven by substantial government subsidies. The result was a rapid increase in the number of semiconductor companies and parks. In 2020 alone, 50,000 semiconductor-related companies were registered, with substantial investments from provinces like Jiangsu, Anhui, Zhejiang, Shandong, and Shanghai as well as from various government-controlled organizations.

However, several high-profile projects have come to nothing, including the collaboration between GlobalFoundries and Chengdu, which ended in failure, and the Wuhan Hongxin project, which was exposed as a scam. Since early 2023, 23 companies have retracted their plans to go public, highlighting the cautious stance of investors toward the sector.

Looking ahead, the tightening of IPO policies in 2024 is expected to make it harder for underqualified semiconductor companies to raise capital. Experts predict that higher listing standards will lead to more companies exiting the market due to financial challenges and increased difficulty in securing investment.

These failures have significantly undermined confidence in the prospects of China's semiconductor industry. Nonetheless, China's government continues to raise money for the sector and just recently it poured some $47.5 billion into its Big Fund III.

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