China’s semiconductor chip conglomerate Tsinghua Unigroup announced last Wednesday that it will receive a strategic investment of $9.42 billion. The investment from unnamed investors will reportedly allow the company to avoid bankruptcy.
Back in 2015, the company had plans to invest $47 billion over five years, including the purchase of U.S.-based Micron, to become the world’s third-biggest chipmaker, according to The Economic Times. The Micron merger bid failed and its two chip factories, built with a price tag of $30.8 billion, have suffered delays and may have to be shut down, according to NikkeiAsia. Last year, facing a mountain of debt, Tsinghua Unigroup, known for being part of the “Made in China 2025” industrial initiative, faced bankruptcy proceedings.
Tsinghua Unigroup’s woes fit into the thesis that reports of China’s global technological dominance have been exaggerated, according to Pranay Kostasthane, deputy director of Takshashila Institution in India. “Once touted as China’s leading chip design house, it has failed to make any major breakthroughs. As of now, it is reeling under debt,” he wrote in The Economic News of India.
Fuel for the fire is provided by the Chinese Communist Party, which promotes the idea of Chinese tech dominance to spread the belief that it has the country under control, according to Kostasthane. The U.S. military/industrial complex may be apt to embrace the idea that China is more advanced technologically, compared to the United States. That will lead to more U.S. government expenditures on technology, particularly chip factories. (Think, Sputnik.) He also makes the point that China’s costs are much higher than the United States, because China’s per capita GDP is one-eighth of the U.S. GDP per capita.
“Simply put, every dollar used in pursuit of one technology goal in China is eight times as costly as a dollar used for the same purpose in the U.S.,” Kostasthane wrote. “With limited resources available, China might well be able to take a lead in a few areas but the opportunity costs are likely to catch up much before it reaches anywhere near self-reliance.”
China’s free ride from accessing technology developed by U.S. companies is over, as well, according to Kostasthane, because of new restrictions put into place. Not to mention, recruiting talent to Beijing is a much harder sell than Silicon Valley.
By J. Sharpe Smith Inside Towers Technology Editor
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