Wuhan Hongxin Semiconductor Manufacturing Company (HSMC) has run out of cash and its future in unclear, according to to reports in EE Times and Southern China Post. The company, which was to build a $20 billion fab, has been taken over by the municipal government in the central Chinese province of Hubei. The future of the company is uncertain. 

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. 

“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.” 

Mr. Chiang is a former head of R&D at Taiwan Semiconductor Manufacturing Co. (TSMC) and a renowned veteran of the semiconductor industry. He joined HSMC in 2019. 

“My experience with HSMC was a nightmare, unfortunately! It is really hard to describe in a few words,” said Mr. Chiang, in an conversation with the Southern China Morning Post. 

HSMC used to have rather great plans. Founded in 2017, it planned to build a $20 billion fab sometimes in a 2019 ~ 2020 time-frame. The company intended to start volume production of chips presumably using its in-house-developed 14nm and 7nm technologies right from the start, leapfrogging SMIC and Hua Hong, two leading foundries in China. 

As it appears, the plan has not worked out. Meanwhile, HSMC has not commented on the story.