Beijing’s ambitious plan to consolidate its fragmented semiconductor sector into a few globally competitive giants is running into serious resistance. Despite government-led efforts to merge key chip equipment makers, negotiations are stalling due to disputes over ownership structures and valuations.


❗ Clashing Interests Slow Progress

The Chinese government has been pushing for state-led mergers of key industry players to consolidate technology and build national champions. However, according to one source, there are “too many conflicting interests.” Sellers don’t want to take losses, and buyers refuse to pay inflated prices.

Although talks are reportedly ongoing, the likelihood of full consolidation is shrinking.


🧩 What Would Mergers Achieve?

Analyst Edison Lee from Jefferies says consolidation could help China build a self-sufficient ecosystem and reduce dependence on U.S. giants like Applied Materials and Lam Research. In 2025 alone, 26 semiconductor acquisitions were announced. The largest so far is a $16 billion merger between CPU maker Hygon and supercomputer company Sugon, executed via a share swap.


💸 The Problem: High Prices, Weak Assets

Bernstein analyst Lin Qingyuan notes that Chinese authorities have realized fragmented investments are too small to be effective. The focus is shifting toward developing a handful of globally competitive national champions. But many firms on the market lack “real technological moats,” according to investors, making strategic acquisitions unlikely to succeed.

Even firms best positioned to buy struggling companies are often the first to reject deals due to asset weaknesses and excessive prices.


🏭 Other Industries Join the Race

Companies from unrelated sectors – like real estate and textile machinery – are eyeing opportunities in the chip space. Still, enthusiasm doesn’t guarantee results. According to Wind data, eight announced mergers or acquisitions in 2025 have already fallen through.

For example, leading Chinese EDA company Empyrean Technology canceled its planned acquisition of smaller rival Xpeedic last month due to unresolved disagreements. Similarly, shoe manufacturer Zhejiang Aokang and knitting machine specialist Ningbo Cixing also backed out of semiconductor deals over valuation disputes.


⚖️ Sellers Refuse to Lower Prices

Analysts point out that most asset owners are unwilling to accept offers below book value – even as their financial performance declines. This inflexibility is making Beijing’s consolidation goals increasingly unfeasible.

If China truly wants to build a strong, competitive semiconductor industry, it will have to overcome not just technological, but economic and psychological barriers between companies and investors. For now, frustration outweighs unification.


#china , #GlobalMarkets , #chip , #Technology , #worldnews

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