Hongxin: China’s Billion Dollar Semiconductor Failure

China imports over $300 billion worth of semiconductors each year. The country is reliant on chip technology imports for its high technology products.

The government has made it clear that they want to be able to make cutting edge chips within a few years. And it appears that they are willing to spend almost whatever it takes in order to create this homegrown industry.

Such demands will always give rise to charlatans. In this video we look at one really big charlatan - Wuhan Hongxin Semiconductor Manufacturing, HSMC or just Hongxin.

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[MarkBarrett]

I literally laughed out loud when they said a startup would make 30, 000 wafers per month, then the video said they made 100, 000 wafers of 14nm per month;
I out loud said "No" twice.

[llee]

Even in Canada. About 20 years ago, a company got Alberta government funding for an LCD display fab. As a proof he glued 4 smaller computer panels together so very obvious.

[jase]

Thank you Asianometry for another brilliant video! There’s a lot of smart scientists, engineers and PE guys in China, I’m just shocked by how gullible the government officials were.

[musonobari]

'Mt Kilimanjaro of cash'😃😂😂😂 Hey there guys 👋🏽 From Tanzania here, where Mt Kilimanjaro is found 🇹🇿😊putting that aside, Nice Video, very informing. 🙂

Innovations are fraught with failures. So keeping trying till you succeed Nothing to get disappointed

[mastershredder]

Good point that the company founders wanted to get out as fast as possible. Especially in an industry where it takes decades to even begin to succeed. Never trust a 70+ year old founder or CEO in this case. Even China should have figured that easy one out.

[jdtsb]

Who'd have thought it? Making microchip s is not like making fake bags and shoes. Apparently no one told China its not easy to copy microchip tech or buy out companies producing chips.

[XerosXIII]

really enjoy your videos, such insights to asia's history and current events that I never heard of!

[shazmosushi]

Sounds like you're back to your proper microphone setup. The recording quality is much improved over your recent videos!

[pettypractice]

Great video, and regarding the last part of the video, behind closed doors people in the Chinese finance industry do regard it as a fraud.

[taiwanisacountry]

I think it is a fraud simply from the amount of new Chinese companies that want to develop semiconductors.

[Storm]

I spoke to a Huawei guy in Beijing very recently, he said that their chip will be ready in 12 months time. Is he right? What do you know about their situation?

[josuad]

China is used at using this tactic of just shoving money at the problem, and hope it solves itself. I mean, it worked with many of their industry. Give a lot of incentives to start whatever industry the CCP wants to create, be it land, money, anything the government can provide, and let it run. From solar panel industry to low tech industry, all worked the same way.

The money from the govt is simply used to poach talent and buy new expensive equipment from overseas, make them operate it and/or reverse engineer it, and boom. suddenly China become the world leader in said industry in several years, because they use cutting edge machines and really talented people from overseas, and can sell their product for really cheap because they don't need to mind about profit yet, they can simply run operations from govt money.

But semiconductor is... harder than that. Established companies are making and spending stupid amount of money for newer and newer nodes. And those kind of money is probably more than what the CCP is prepared to throw as incentive at this industry. Equipment and talent is also harder to get thanks to rising suspicion from the world regarding China's rise of power lately. Talents in semiconductor business now is being protected by each of their govt, and encouraged not to "betray" their country. While from the equipment side, getting to cutting edge is basically impossible for China already thanks to the US banned the use of EUV in/for China.

Now, with the new semiconductor fervor in China, policy makers must understand that their age-old, well proven tactics no longer work. The world is already aware of China's tactics and keeping a close eye on it. So yeah, they need other methods to rise in semiconductor industry. And I think I've heard several times that there's this mentality in mainland China, "If you get scammed, it's your fault for being dumb enough to get scammed". So scammers are now seeing the amount of money out there, and how easy it is to take the cash and leave is starting to get to work. Basically, it's an internal issue with basically low ethics in Chinese society, combined with the govt spreading money around hoping for the problem to fix itself while the fix is nearly impossible to get creates the perfect window for cases like this.

[SUNRISE-ADVENTURES]

LOVE your work!!! The Lebowski MEME made me LOL!!!

[jaykita]

Excellent summary. It's dangerous for any economy to focus on projects that are primarily there to generate wealth. A foundry business develops through a progression of talent and expertise. Hopefully the US avoids this as the Congress gets involved (another dinner bell for the grifters?)

[karthur]

An ancient Chinese proverb says, "Failure is the mother of success."

Nothing wrong with failure or going fast or failing fast, what is important is they learn from it and implement reforms to do better at the same pace as well.

You gotta stop viewing China from a westerner's point of view, that's why the US/allies has been on the losing end in every confrontation, becoz they keep making wrong judgments based on wrong intel/conventional wisdom.

In my opinion the most important thing people get wrong is, China isn't "just a typical rising nation", "they were a Superpower that fell from the top, and are now rising again", there is a very big difference, especially with their mentality, perspective, ambitions etc. People keep writing books about China this and China that for the past 30 years, and are still getting it wrong till this day.

Doesn't work? reform try again, corrupt officials? punish + more merit based system, reforms etc.

On a side note, can't wait for them to launch their space station into orbit, they're breaking monopolies, like their digital currency JV with Swift, or the deal with Russia to build a lunar base, no longer needing to sing the the US's tunes.

[monkeyking-self-proclaimed]

It's a failure more than fraud. If it was fraud, heads will be rolling. Like you said, some industries take time. Learn to walk before you run because you will fall.

[matthewohkokyew]

Fantastic video on the semiconductor industry once again! Have you considered doing a video on the KMT remnants in Thailand, sounds like a fun video idea.

[maxmagnus]

Hey I've heard that Russia is producing chips for China now. I would love to hear your thoughts on that one. How big it is, what generation those chips are... you know your standard review of it with a lot of more things that I can not even think to ask. Tnx.

[albertwong]

Hongxin sounds more like a scam than a legit attempt to be a major semiconductor maker.... who was their technology guru they hired? Why didnt u dig further and instead make this conclusion??