Amid the impact of the US control over advanced semiconductor technology and China’s policy drive, the wave of mergers and acquisitions in China’s semiconductor industry continues. Experts believe that under the Chinese Communist Party’s policies, many chip companies are trying to leapfrog but lack solid technological accumulation. Even if they merge to expand, breakthroughs are still difficult to achieve.
Recently, there has been a wave of mergers and acquisitions in China’s chip and related industries.
On August 6th, Huawei Technologies Co., Ltd. (Huawei) announced that it is continuing due diligence on the stock-for-stock merger with Inspur Group Co., Ltd. (Inspur Information) and pushing forward with resource integration preparations.
If Huawei completes the acquisition of Inspur Information, its total market value may exceed 400 billion yuan, becoming a leading Chinese company in AI chips and server markets. Titanium Media commented that Huawei aims to be the “NVIDIA of China.”
On August 5th, Hunan Guoke Microelectronics Co., Ltd. (Guoke Micro) released a new announcement about a significant asset restructuring. The announcement stated that Guoke Micro intends to acquire 94.366% equity of Zhongxin Integrated Circuit (Ningbo) Co., Ltd. (hereinafter referred to as Zhongxin Ningbo) by issuing shares and paying cash, along with the progress and risk disclosure.
According to Financial Times on August 5th, the Beijing government this year convened a group of chip equipment manufacturers to discuss a potential super-merger plan, integrating different technologies into a state-supported giant enterprise to cope with the US export restrictions introduced at the end of July under the “Artificial Intelligence Action Plan.”
The report mentioned that Beijing considers strengthening domestic chip capabilities a top priority and attempts to consolidate the scattered chip industry into a few strong companies capable of global competition.
Public information shows that in the first half of 2025, over twenty merger and acquisition announcements were disclosed in the A-share semiconductor sector. According to incomplete statistics from China Business News, including announcements from 2024, the total number of merger and acquisition announcements could exceed 50.
However, not all mergers and acquisitions have been successful, leading to frequent failures as depicted by the media.
For example, on the evening of July 9th, Beijing Yehua Dajiu Software Co., Ltd., a leading EDA company in China (Yehua Dajiu), announced the termination of the major asset restructuring of Shanghai EDA Semiconductor. EDA refers to Electronic Design Automation, which is software for chip design.
Yehua Dajiu stated that the reason for the unsuccessful merger was the failure of the transaction parties to reach an agreement on the core terms after negotiations and consultations.
Financial Times reported that due to opposition from companies and investors on ownership structure and valuation, negotiations between chip manufacturing equipment groups reached a stalemate. Additionally, local governments were unwilling to bear losses.
“There are significant differences in interests,” said a source familiar with the negotiation. Another source added, “It’s unlikely to achieve the large-scale integration originally envisioned by the Beijing government.”
On August 7th, Taiwan Institute for National Defense Security studies researcher Shen Mingshi analyzed for Epoch Times that the issue lies in determining who merges with whom, who has to give up, probably resulting in a struggle. It’s a current issue to decide who will take the lead – a province, a company, or a research unit.
Regarding this wave of mergers and acquisitions, Professor Yeh Yaoyuan from the International Research Institute of St. Thomas University in the United States told Epoch Times, even if the Chinese Communist Party consolidates all of China’s current chip industry or companies, and if they all come together, developing into a company the size of Samsung or TSMC still has a way to go because China’s development scale in the chip sector is not “as high as other countries.”
Yeh Yaoyuan explained that the main driving forces behind the mergers are “competition between the US and China” and “US sanctions against China’s chips and technology.” Therefore, manufacturing chips in China is not as simple as just making chips but also considering the hardware for chip manufacturing.
Currently, ASML, the leading semiconductor equipment manufacturer in the Netherlands, is still the only company globally with mass production capability for EUV lithography machines. EUV technology uses 13.5-nanometer light waves for circuit patterning and can produce 5nm or even more advanced chips.
Since the US has banned ASML from exporting advanced EUV equipment to China, China can only develop alternative solutions independently. Although China can generate EUV light sources under laboratory conditions, most experts believe that transitioning from lab demos to stable, commercialized operating systems will still lag behind by 20 to 30 years.
Shen Mingshi believes that Trump’s announcement on Wednesday (August 6th) to impose 100% tariffs on all computer chips is probably targeted at China’s chips. He thinks that Trump may not set low tariffs, as it aims to protect domestically produced chips while considering geopolitical or targeted factors.
From a technological perspective, Shen Mingshi, a researcher at the Taiwan Institute for National Defense Security Studies, believes that China’s technological capabilities are insufficient in advanced chip processes, which is related to the Chinese Communist Party’s chip policies.
Shen Mingshi told Epoch Times, “In the past, the Chinese Communist Party set goals, and then local governments or relevant companies rushed to implement them while applying for national subsidies through various plans, resulting in a development model that blossoms everywhere.”
However, under this expansive model, he mentioned that some companies can find high-tech partners for cooperation, while others cannot. For those unable to find partners, they resort to other methods like buying or deceiving to develop their chips.
“Basically, it’s a matter of leapfrogging or quick-fixes, unable to gradually develop step by step. Because they can’t progress step by step, they lack accumulation,” Shen Mingshi said.
The consequence of this lack of accumulation, he mentioned, primarily leads to products with low yields or chip quality inferior to products from Western, Japanese, and South Korean manufacturers. Therefore, the reason for so many mergers – with blossoms everywhere of poor quality chips – is that they are still unable to match up with mature process or advanced process chips.
Regarding the “poaching” method consistently utilized by the Chinese Communist Party, Shen Mingshi believes it’s not sustainable in the long run.
He said, “By relying on poaching or stealing, one can obtain some related technologies, then develop a seemingly comparable product with advanced countries through leapfrogging methods. But eventually, it will be discovered that it lacks sufficient foundation or some basic technological capabilities, resulting in significant quality gaps.”
“Therefore, whether it is through mergers in the chip industry or efforts to enhance its own research and development or production capacity, China still faces many challenges, especially with the impact of Trump’s tariffs, the future prospects are not optimistic.”
Yeh Yaoyuan also touched on similar issues, saying that chip manufacturing is very delicate and different from the automobile industry. In the 1990s, China gained all the technology through cooperation with foreign companies, but chips are different.
“Whether it’s a 2nm or 3nm chip, you can’t see it or dissect it. It’s not like I can just tear it apart to study and replicate it; this technology is different.”
For companies capable of producing high-end chips, Yeh Yaoyuan said that as these companies are mostly relying on the US market, they cannot collaborate with China. Therefore, China faces difficulties in manufacturing chips independently and losing the opportunity to replicate others’ technology.