Recent discussions in Chinese media have centered around the deregistration of almost 10,000 chip companies in 2021 and 2022. There is some debate regarding whether this is due to the U.S. government's export control policies. While this topic was reported on by Chinese state media, including People's Daily and CCTV, back in February 2023, it was not reported as a result of U.S. government actions but rather as an appeal to Chinese chip companies to focus on their R&D and avoid the issue of being subject to technology restrictions.

Various factors have contributed to the closure of these companies in China. For example, as China's consumer electronics market faces stagnant demand and the semiconductor downturn continues, some suggest that China's policy of localization in its chip industry is entering the “slow lane.” Even though former U.S. presidential administrations put in place bans and export controls against China, these restrictions did not cause the closure of chip companies in China.

Instead, money flowed into the establishment of many IC design firms in recent years, leading to the emergence of “fake tech companies” that were not competitive and quickly experienced failure. Short supply in the Chinese consumer market has also contributed to structural supply-demand imbalances since the third quarter of 2021. Multiple black swans have appeared in 2022, forcing the semiconductor industry to enter a down cycle of inventory digestion in the second half of the same year. Additionally, climbing costs due to inflation and the shortage and costliness of high-end chip talents also pose significant challenges for many companies.

These closures highlight the capital-, technology-, and talent-intensive nature of the semiconductor industry. Even with sufficient funds, companies must recruit top talents, invest in R&D, and secure enough capacity from foundries to ensure their long-term survival. The sustained downturn in the global economy further compounds this issue, as chip companies face a dual-decline of price and shipment.