Chinese Foundry HSMC Has Run Out of Money, According to Ex-CEO

[Random_Person1234]

Summary

Wuhan Hongxin Semiconductor Manufacturing Company (HSMC) has run out of money, and it's future is unclear, according to reports in EE Times and the South China Morning Post. According to corporate registration records, HSMC has been taken over by the municipal government in the Chinese province of Hubei. 

 

Quotes

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A cash-strapped Chinese semiconductor factory described by its former chief executive as a “nightmare” has been taken over by the Wuhan government in a setback for China’s pursuit of chip autonomy.

According to the latest corporate registration records compiled by Chinese data site Tianyancha, Wuhan Hongxin Semiconductor Manufacturing Company (HSMC) has been taken over by the municipal government in the central Chinese province of Hubei.

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“My experience with HSMC was a nightmare, unfortunately! It’s really hard to describe in a few words,” said former HSMC chief executive Chiang Shang-yi when contacted by the South China Morning Post via LinkedIn for comment.

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For governments, one of the ways to build up a world-class industry is to create dozens of local companies, make them compete with each other, and then see how the fittest survive. This is not exactly how it works in the semiconductor industry for several reasons. Firstly, this industry is highly iterative by its nature, there is no place for leapfrogging here. Secondly, in a very capital-intensive industry it is close to impossible to fund dozens of companies even for governments. Thirdly, the industry has to be competitive globally, not just locally. Having realized that, the Chinese government announced this year that it would continue to support only the biggest and the fittest semiconductor manufacturers, which, in case of the Chinese foundry industry, means Semiconductor Manufacturing International Co. (Co) and Hua Hong. 

HSMC appears to be one of the victims of this decision. The company was supposed to build a $20 billion fab and even got multiple loans for that, but it has never worked out. For some reason, unexpectedly even for HSMC's CEO.

Quote

“Investors ran short of cash,” said Chiang Shang-yi, an ex-CEO of HSMC, in a brief interview with EE Times. “I got caught by surprise. It’s over now, and I’m back home in California.” 

My thoughts

I wonder how this will affect Chinese plans to be self-sufficient in the semiconductor industry.

 

Sources

https://www.scmp.com/economy/china-economy/article/3110368/chinas-semiconductor-dream-takes-hit-local-authority-takes

https://www.tomshardware.com/news/chinese-foundry-hsmc-runs-out-of-money-claims-exceo

https://www.eetimes.com/china-tsmc-rival-hsmc-runs-out-of-cash-ex-ceo-says/

 

[StDragon]

It's "only" 20 BILLION down the rathole. No big deal. 

 

[StDragon]

37 minutes ago, zhnu said:

Well the Chinese government has money so they can outright finance them, but I really don't know if they want to given they haven't really accomplished much yet.

But comrade, they will. They will finance them to build chips for the milit....err...consumer market.

[Maticks]

That's ok I'm sure they will find something to rip off from TSMC to produce and sell in China in no time.
Maybe some new cyzen processors.
 

[CarlBar]

Did any of you actually read the OP or did you engage your mouths without first engaging your eye's?

 

It says right there in the Op that the reason they're in trouble is because a huge mass of loans to cover that 20 billion never got organised because the Chinese national government decided to stop funding most of the Chinese chip fabs. Not sure why the Whuan local government has stepped in though, probably a classic case of the right hand not knowing what the left hand is doing.

[TheReal1980]

Now that the CCP controlls the company we should see some serious competition in the market place.

I bet ASML laughs all the way to the next billion.

[Bombastinator]

There are apparently 2 other major semiconductor companies in China according to what I read of the article, and the chinese federal government viewed this one as not worth saving, so I doubt it’s going to have a massive effect on China.  Not nearly as large as the effect intel problems could have on the US. The two other chip makers in the US do not manufacture their chips locally.
im curious about that 20 billion though.  That money is apparently poured down a hole.  Where did it come from?

[Eaglerino]

lots of things in china seem to run out of money, get acquired by some form of the chinese government, then suddenly have record profits that are definitely real and tacked onto their rising GDP

[thechinchinsong]

I can't ever see indigenous Chinese semiconductor companies ever being able to compete with the likes of Intel, TSMC, or Samsung. The way that the CCP operates with companies like HSMC and others weakens the natural incentive for companies to innovate. For example, AMD needed to produce Zen in order to not go bankrupt and Intel is turning up post-skylake since Zen was such a success. The most important semiconductor companies in China are guaranteed by the CCP and thus just don't have that incentive. It's like the contrast between Boeing, which can always depend on the US government teat for easy contracts, vs SpaceX, which must innovate to survive.

[Spotty]

Thread cleaned. Reminder this is a tech forum, not a politics forum. Just because this has something to do with Chinese fab does not mean it's an opportunity to complain about the Chinese Government or Communism.

 

No political content, regardless of your views.

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[williamcll]

HSMC was never competitive in the first place, they lacked the ability to make anything better than 28nm. I doubt a cash injection from the government would help at this rate.

 

SMIC however...

[thorhammerz]

8 hours ago, huilun02 said:

Well at least the country hasnt run out of money like in some places

One never runs out of currency if one also controls the supply.

 

Although whether the real (and/or relative) purchasing power of each nominal unit is preserved, is a whole other issue .

[Mark Kaine]

15 hours ago, CarlBar said:

Did any of you actually read the OP or did you engage your mouths without first engaging your eye's?

 

It says right there in the Op that the reason they're in trouble is because a huge mass of loans to cover that 20 billion never got organised because the Chinese national government decided to stop funding most of the Chinese chip fabs. Not sure why the Whuan local government has stepped in though, probably a classic case of the right hand not knowing what the left hand is doing.

yeah, I read it. problem is it doesn't make too much sense! 

 

Also "it somehow didn't work out" said the clueless CEO

[Brooksie359]

16 hours ago, Bombastinator said:

There are apparently 2 other major semiconductor companies in China according to what I read of the article, and the chinese federal government viewed this one as not worth saving, so I doubt it’s going to have a massive effect on China.  Not nearly as large as the effect intel problems could have on the US. The two other chip makers in the US do not manufacture their chips locally.
im curious about that 20 billion though.  That money is apparently poured down a hole.  Where did it come from?

Honestly I don't think that is a huge issue. There are alot of businesses that rely of foreign supplies or manufacturing in the US. I honestly don't get companies that try and rely on only American suppliers and manufacturing for the sake of being all American made unless it makes the most economic sense to do so. I do think Intel will eventually get their stuff together and more competition is always better and thankful TSMC has been pushing the envelope even when others are have been falling behind. 

[StDragon]

33 minutes ago, Brooksie359 said:

I do think Intel will eventually get their stuff together and more competition is always better and thankful TSMC has been pushing the envelope even when others are have been falling behind. 

Intel is still #1 in terms of being a chip supplier. Just because they're not leading the bleeding edge doesn't mean they're still not successful, because they very much are.

[Bombastinator]

1 hour ago, Brooksie359 said:

Honestly I don't think that is a huge issue. There are alot of businesses that rely of foreign supplies or manufacturing in the US. I honestly don't get companies that try and rely on only American suppliers and manufacturing for the sake of being all American made unless it makes the most economic sense to do so. I do think Intel will eventually get their stuff together and more competition is always better and thankful TSMC has been pushing the envelope even when others are have been falling behind. 

Referring to intel, I don’t either. Perhaps my point came across wrong.  If one is less than another and the first isnt all that important it implies the other isn’t either.

[Brooksie359]

1 hour ago, StDragon said:

Intel is still #1 in terms of being a chip supplier. Just because they're not leading the bleeding edge doesn't mean they're still not successful, because they very much are.

Well I am unsure that will be the case in the near future with the way things are going. Obviously Intel isn't going to be in too rough of shape as they still make ok chips but they are simply worse than AMD right now in the desktop market and server market. Even in the laptop market AMD has some crazy good chips along with apples M1 chip as well. I think Intel has enough other business outside of cpus that even if their cpu division starts underperforming they still will be fine. Also the fact that they have integrated gpus in all of their desktop chips also makes them very viable for simple OEM builds so they still have a good market their as well. All I was saying is that Intel is currently behind in process node compared to TSMC but hopefully will catch up. 

[thechinchinsong]

6 hours ago, thorhammerz said:

One never runs out of currency if one also controls the supply.

 

Although whether the real (and/or relative) purchasing power of each nominal unit is preserved, is a whole other issue .

I mean there are many countries that manipulate their own currency to certain extents, just nobody as often nor as blatant as China. The problem with the CCP (if you ignore all the ethical ones that is) is that while they are moving to further centralize/organize an already very planned out socio-economic policy, they naturally must forgo some of the advantages of their previously free(-er) markets. So far it's actually been working quite for them seeing as the years of China's most meaningful economic growth came with tighter party control of companies (as opposed to when they were the free-est), but scenarios like this might be the drawbacks that were unforeseen by the CCP. Basically its hard for companies that are always under the guarantee and/or influence of another entity (with potentially very different interests) to compete with companies without those restrictions.

[Drama Lama]

Well it seems like there’s more needed to build up a company than just pumping lots of money into the project 

[Drama Lama]

22 hours ago, Bombastinator said:

Where did it come from?

Mostly investors I guess 

it would not have run out of money if it was just completely state-owned ( or we‘d see other headlines)

[Bombastinator]

1 hour ago, Drama Lama said:

Mostly investors I guess 

it would not have run out of money if it was just completely state-owned ( or we‘d see other headlines)

Well yes, but often investors scatter unevenly.    It might be a random smattering throughout the world, in which case it doesn’t really matter, but if a big chunk are from one place and that place is small there’s enough money there it could start to affect things. It’s about size and concentration. I get the impression the Chinese fed did not consider the company too big to fail, but a state/province or whatever apparently did not so they picked it up, or something.  A single mine doesn’t matter much on the national level unless you happen to live in the town where the mine is.

Edited November 25, 2020 by Bombastinator

[DaRk0]

On 11/24/2020 at 7:47 PM, StDragon said:

It's "only" 20 BILLION down the rathole. No big deal. 

 

Well, when you look at China's budget, 20 bill is not that much tbh.