China opened corruption probes in July 2022 into some top executives in its semiconductor industry, as it rethinks its gold rush approach to chip self-reliance
Wearing a laboratory coat, China's top leader, Xi Jinping, inspected a subsidiary of Yangtze Memory Technologies Company, a national semiconductor company based in Wuhan. Tweets: @brianmannadk , @liyuan6 , @yangxifan , @neysunm , @andreasharsono , @nytimes , and @pstasiatech Tweets: Brian Mann / @brianmannadk : Fascinating read. Headline says China. But the article lays out how globally integrated ALL our lives are. As military tensions rise, the semiconductor tech we all use daily relies on fragile linkage of US, the Netherlands, China, Taiwan and South Korea. https://www.nytimes.com/... Li Yuan / @liyuan6 : My latest on why the latest investigations in the semiconductor industry revealed the tension between Xi's inward and backward vision for tech self-reliance in China and the very nature of semiconductors. https://www.nytimes.com/... Xifan Yang / @yangxifan : How China's planned economy works: “In... 2020, more than 58,000 firms registered as chip-related enterprises. Some... used to be in fashion, construction... and changed their registration information only to gain access to easy money.” https://www.nytimes.com/... Neysun Mahboubi / @neysunm : Interesting, by @LiYuan6. My Q though: if the very nature of semi-conductors makes self-reliance an elusive goal, that's not just true (and frustrating) for China, but presumably would be for the US too, right? https://www.nytimes.com/... Andreas Harsono / @andreasharsono : After heavy national investment in semiconductors to break a dependence on global chips, Chinese leader Xi Jinping seems unhappy with the results https://www.nytimes.com/... https://twitter.com/... @nytimes : After China's heavy investment in semiconductors to break a dependence on global chips, corruption investigations in the industry “suggest that Mr. Xi may not be getting what he expected, or at least not quickly enough,” our columnist @LiYuan6 writes. https://www.nytimes.com/... Paul Triolo / @pstasiatech : Yes, governments can't plan for either self-reliance or global domination in high tech sectors, no matter how much money they throw at it. Amusing when Western commentators would never say this works for US or allies but think China can plan to dominance. https://www.nytimes.com/...
Context & Ripple Effects
The July probes are the visible end of a longer arc: [[a:981630|Beijing has grown frustrated with a years-long failure to develop chips that can replace US silicon]], after a subsidy-heavy 'gold rush' that scattered capital across the sector. The related coverage traces how deep the problem runs — China came close to US semiconductor capability in the 1960s before politics and misguided industrial strategy cost it the lead.
The spending itself never slowed: Chinese orders for chipmaking equipment rose 58% year over year in 2021, with some US chipmakers claiming Chinese buyers were paying above-market prices. Xi Jinping's inspection of a Yangtze Memory Technologies subsidiary in Wuhan, paired with anti-graft investigations, signals the money will now flow through tighter political control rather than broader dispersal.
First-order effects
- Top semiconductor executives at national champions are now under active corruption investigation, putting YMTC and similar flagships under leadership instability at precisely the moment they are meant to deliver import substitution.
Second-order effects
- Equipment vendors face a procurement environment where the 2021 surge in Chinese orders gets audited for graft and overpayment, pressuring the above-market pricing some US suppliers had been capturing.
Third-order effects
- If the pattern holds, China's chip program consolidates from a diffuse subsidy race into a smaller set of politically supervised national champions — repeating the centralized-industrial-strategy dynamic that the 1960s-era coverage shows previously cost China its early lead.
The trend: China's semiconductor self-reliance drive is pivoting from a broad-subsidy gold rush toward centralized, corruption-audited national champions, with political accountability replacing capital dispersion as the governing mechanism.