WSJ: China, Where The Chips Are Down

I watched a China Insight video a few nights ago about the arrest and investigation of six of the biggest semiconductor bigwigs. Loads of corruption in this sector. And they’re only getting around to making - and very badly at that - .13 nanometer chips?

WSJ: China’s Computer Chips Are Down

Sub-headline: Xi Jinping is said to be unhappy with the results of state subsidies for semiconductors.

Bloomberg this week reports that Beijing is launching corruption investigations into government ministers and business leaders involved in its semiconductor initiative, which is a cornerstone of President Xi Jinping’s Made in China 2025 plan to achieve manufacturing self-sufficiency. Corruption crackdowns are Mr. Xi’s modus operandi when things don’t go according to Communist plan.

When senior government officials last month reviewed the country’s chip-making progress, they reportedly grew dismayed that advances may have been overstated and investments weren’t paying off. Mr. Xi’s plan to throw money at the semiconductor industry, as with others, has resulted in many unproductive companies chasing government subsidies.

About 15,700 new semiconductor companies registered in the first five months of last year. As it turns out, government is a poor allocator of capital, and semiconductor handouts have spawned cronyism and graft. These problems are intrinsic to industrial policy. But Mr. Xi is blaming China’s industrialists, rather than his planning model.

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