Chinese Chip Giant Fujian Jinhua To Cease Operations After US Ban

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The start-up, founded with massive state investment in 2016, has all but run out of imported materials following the US’ industrial espionage indictment last year

Fujian Jinhua, China’s massive state-backed chip start-up, is set to shutter production in the next few weeks due to a parts ban imposed on the company by the US last October.

Jinhua, founded in February 2016 with a $5.6 billion (£4.26bn) investment from the Chinese government and Fujian province, is part of a broader plan for China to achieve at least 70 percent self-sufficiency in the semiconductor industry by 2025.

The company had worked to scale up the production of DRAM chips for servers, collaborating with Taiwanese contract chipmaker United Microelectronics (UMC).

But the US Justice Department last year filed criminal charges against Jinhua, alleging it conspired to receive intellectual property of US chipmaker Micron via UMC, which is also a defendant in the case.

Export ban

As a result, in October the US Commerce Department banned exports and technology transfers to Jinhua.

The company has now abandoned its DRAM production efforts after UMC dissolved the DRAM development team that had been working with the Chinese firm, Business Korea reported.

Production is set to halt by March as Jinhua runs out of imported materials, reported The Financial Times.

It cited an unnamed person familiar with the matter as saying UMC has “pretty much reached the end of the road”.

Micron alleges that former employees of a company acquired by Micron left to join UMC, and then handed technology to Fujian Jinhua.

More than 200 of the roughly 300 engineers UMC sent to Jinhua have now returned to Taiwan, the majority departing over the past two months, the FT said.

Immediately following the introduction of the sanctions, UMC said it was suspending its partnership with Jinhua.

Trade war

The US’ measures are part of a broader trade war between that country and China, which some in the industry see as being intended to prevent China from becoming a global power in the semiconductor sector, as firms such as Huawei and ZTE already have in the telecoms equipment manufacturing business.

Business Korea cited an unnamed industry professional as saying the US “thinks that it will be able to protect its semiconductor market in the future if it keeps China at bay in the DRAM market,” adding that Fujian Jinhua had been targeted as a result of this strategy.

Taiwan, as a US ally, is another matter, and the criminal charges against UMC are likely to be dropped in exchange for a large fine, the FT said, citing an unnamed US official.

Other major chip start-ups in China include Yangtze Memory Technologies Co., which is developing NAND flash memories, and Innotron Memory Co., which is developing mobile DRAMs.

Fujian Jinhua was seen as particularly important, however, since its server DRAMs are critical for high-performance back-end infrastructure.

The company said on Friday it had notified the US that it intends to file a complaint to be taken off the country’s export control list, saying it does not pose a national security risk.

Earlier this month the firm pleaded not guilty to the US charges.

The growth of China’s semiconductor industry is likely to drop to 16 percent this year as a result of the trade conflict with the US, its slowest rate since 2013, according to TrendForce.

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