It has been reported that investment sentiment domestically towards Chinese corporations is declining due to concerns over U.S. export controls and a supply glut of legacy semiconductors. The Chinese government has allocated tens of trillions of won in subsidies to foster the semiconductor industry, but the number of investment attractions by Chinese corporations this year has reportedly decreased by about 35% compared to the previous year.
On the 17th (local time), the Hong Kong South China Morning Post (SCMP) quoted data from local market research firm JW Insights, stating that "investment transactions in China's semiconductor industry have decreased by 35.9% to 677 compared to the previous year." The media analyzed that investments had dwindled due to escalating U.S. export regulations and concerns over a supply glut of legacy semiconductors.
Currently, the support for China's semiconductor industry is coming from subsidies from the central and local governments. The Chinese government has raised funds through government-led funds to support the semiconductor industry, securing 138.7 billion yuan (about 27 trillion won) in 2014, 204.1 billion yuan (about 40 trillion won) in 2019, and 344 billion yuan (about 67 trillion won) in the first half of this year. Through this, it directly supports semiconductor manufacturers and the corporations involved in materials, equipment, and components supplied to them. According to SCMP, last year, the Chinese government provided a total of 20.53 billion yuan (about 3.9 trillion won) in subsidies to 25 semiconductor corporations, including Huawei and semiconductor foundry company SMIC, as well as memory manufacturer Changjiang Storage (Hua Hong Semiconductor).
However, as U.S. regulations on advanced semiconductor industries are intensifying, the Chinese government has prioritized the growth of the relatively unregulated legacy semiconductor industry, leading to a supply glut. Chinese memory semiconductor corporations such as CXMT and JHICC, as well as foundry corporations like SMIC, are raising their market share through low-price offensives, supported by government aid. According to reports from Taiwan's Economic Daily, CXMT and JHICC are offering legacy products like DDR4 at half the price, while Chinese foundry companies such as SMIC and Hua Hong Semiconductor are providing services at nearly a 40% discount compared to competitors.
Park Yoo-ak, a researcher at Kiwoom Securities, noted, "Chinese corporations like CXMT are pushing out memory semiconductor quantities at low prices, considering the possibility of U.S. tariffs, and it is true that the trend of lower sales prices is accelerating with supply competition becoming more intense."
It is estimated that investment sentiment has frozen even further with the strengthening of U.S. export regulations. SCMP reported that "currently in China, government support funds dominate semiconductor investment," and that "the intensification of U.S.-China trade disputes has deepened U.S. control measures over AI and semiconductor sectors associated with China, leading to a sharp decline in capital inflows."
Concerns are being raised locally that competitiveness in the advanced semiconductor market, centered around AI, may weaken due to this trend. JW Insights stated that the U.S. has surpassed China to become the largest market in the semiconductor industry in the third quarter of this year. According to the National Bureau of Statistics (NBS), the growth rate of China's integrated circuit (IC) production, a measure of semiconductor industry output, notably dropped into single digits (8.7%) for the first time this year in November. Han Xiaomin, the general manager of JW Insights, stated, "Despite a surge in demand for advanced semiconductors essential for AI, China is restricted while the U.S. is making significant investments in AI infrastructure."